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Jim Cramer can't make market players money until bonds stop going down and interest rates stop going up, he told viewers of his "Mad Money" TV show Tuesday. Until that happens, Cramer said, he's going to focus more on educating and less on stock-picking because he doesn't want to hurt people.
Everywhere Cramer goes, he is constantly asked about
and other big drug companies, he said.
But nobody mentions aerospace, agriculture or oil services -- sectors he actually likes.
"Everyone's asking about big pharma, but I keep hoping they mean big
," he said. Unfortunately, nobody ever does.
Cramer said he always responds in the same way, with "No, I don't like big pharma." But because it's never enough to say he doesn't like these stocks, Cramer is dedicating today's show to big pharma.
Cramer said he doesn't mind that the big drug companies are overcharging sick people. In fact, he said, he wishes they would charge even more, because that would change the bears to bulls. He said the real reason he doesn't like this sector is because the companies have lost their growth potential and haven't made any big discoveries.
But Cramer said that if he really had to, he would rather own "ultraexpensive"
, because of their future growth prospects in the year 2012, than a "slow-motion" Pfizer, which will have "real problems" on its hands in 2012 because of "vicious" patent expirations that year.
Cramer said his dislike for the sector goes beyond mere patent expirations. Generics in the group are coming out even before patents expire. In addition, many of the new drugs coming out are bad and facing lawsuits, he said.
Plus, the easy drugs have already been found, and now companies will need more time and resources to come up with new products, he said.
Big pharma is a "bad group." But even in a bad group, there are a couple of picks worth holding or buying, Cramer said. However, before naming his favorite three big pharma plays, Cramer called out a couple of stocks in the sector that he wouldn't touch: Pfizer and
Johnson & Johnson
"Pfizer is really a bad bond masquerading as a stock," he said. Plus, it has the worst of both worlds: "a weak pipe and patent expiration."
But Johnson & Johnson makes even Pfizer look good, Cramer went on to say. Every year from 2008 to 2012, one of JNJ's major drugs goes off patent. Plus, the company's pipeline doesn't look promising.
Sure, Warren Buffett likes the stock, but this is one of those times he just might be wrong, Cramer said.
Although he "loathes" most big pharma stocks, Cramer told viewers he understands that not everyone is going to listen to "sad clown Cramer." He can't tell people to avoid an entire sector, because then they will think he is too negative.
"Most of you are going to do whatever the heck you want," Cramer said. "So I'm here to minimize the damage."
For those that must own a big drug company, Cramer said he has some stocks that he believes are OK. Even though he doesn't usually issue holds and is more of a buy-and-sell kind of guy, Cramer said there are a couple of big pharma names he doesn't mind or is at least "lukewarm" about.
One of them is
, he said. This drug company, while facing "nasty" competition from foreign generics, is balanced out by the fact that it has a big blood-clotting-therapy drug in the pipeline called Prasugrel, which could do a billion in sales in 2010, Cramer said.
Plus Lilly has three profitable drugs in the pipeline: Cymbalta, Humalog and Cialis.
An even better bet is
, a big pharma drug that Cramer said is "worth owning."
Despite the fact that Deutsche Bank has been bearish on this stock and despite its not having any big drugs in the pipe, Cramer called SGP a buy for several reasons.
First, he called the company's CEO, Fred Hassan, "a breeding ground for profit" and said that Hassan has sown seeds that are now starting to bear fruit. For example, SGP's cholesterol partnership with Merck is bringing in boatloads of money for both companies.
But the "best reason" he believes investors should like the stock is that "the government might lift the consent decrees that it slapped on the company for sloppy manufacturing practices," Cramer said. "That should mean improved margins and cost-cutting."
He called SGP his least favorite of his top three big pharma picks because it's had a big run. Cramer recommended that viewers pull the trigger and buy SGP below $28. The stock closed at $30.70 on Tuesday.
Why Wyeth, Novartis
Cramer called out
, the third-least-exposed stock to generic competitors, as his second-favorite big drug company. But though he likes it, Wyeth has some problems, he said.
First, it has an antidepressant drug that is facing "stiff" competition, and its hospital antibiotic drug has already lost patent protection, Cramer said. It's a fact of life that big pharma companies eventually lose patent protection, but the "good companies," such as Wyeth, have drugs on the market that are going strong and a plethora of promising drugs in the pipeline.
Wyeth has an antidepressant that could be approved in the third quarter, Cramer said. Plus, it has two drugs in the market, Prevnar and Enbrel, that are doing well. Additionally, "it has always had a strong franchise for women" with its Primarin menopause drug.
Though Wyeth is a good big pharma play, there is "only one that has good pipe and good patents, and that one is
," Cramer said.
This one has the second-least exposure to patent loss, and though it too has some bad news, that has already been priced into the stock, he said.
Novartis, Cramer said, reaffirmed its 2007 sales targets and iterated that it expects "record income." In addition, it "owns" the hypertension section. But the real reason the company works is because it has a great patent protection bench, he said.
Novartis also has $8 billion in cash that it can use to pay for buybacks. Moreover, it has double-digit growth, while others are in single-digit territory.
"Novartis is the bargain in big pharma," Cramer said.
CEO Joe Moglia joined Cramer on his show and said that he's not being pressured to merge with
"Money managers all manage money in different ways" Moglia said. And though they are likely going to do what they believe is best for their shareholders, "that's not going to influence what we're going to do for ours," he added.
When Cramer asked how much time Moglia spends appeasing shareholders and how much time he spends running the company, Moglia said that one of the things he's become "obsessive" about is ensuring that his employees stay focused on the business plan.
Further, Moglia said he believes that investors have learned "an awful lot" from 2000, when the stock market bubble burst. "The typical investor is more sophisticated" now and typically buys on down days and sells on up days, he said.
To view Cramer's interview with Joe Moglia, please click here.
Cramer was bullish on
Cramer was bearish on
For more of Cramer's insights during the Lightning Round, click here
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