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NEW YORK (
) -- "The most important earnings report is 2012 is upon us tomorrow," Jim Cramer announced to his "Mad Money" TV show viewers on Monday, as he explained what investors should do as
, a stock which Cramer owns for his charitable trust,
Action Alerts PLUS, reports its earnings after the closing bell on Tuesday.
Cramer said that Apple is a special company. Besides being the second most highly valued company in the U.S., Cramer said it's also one of the few that can set the tone for the entire market. That's why he enlisted the help of colleague Mark Sebastian for a special "Off The Charts" segment on how to play Apple's earnings.
According to Sebastian, the way to play Apple's earnings is to sell before it reports. He noted that twice in 2010 and multiple times in 2011, Apple shares have run up ahead of the quarter, only to sell of and sell off big thereafter. Sebastian said investors must sell ahead of the news or risk shares slipping back to pre-quarter levels.
But Cramer said his opinion differs with Sebastian. He said the stock can, and probably will, sell off Tuesday, and the day-traders among us should probably take profits and get back in at lower levels. But for the rest of the home-gamers, Cramer said the risk is that there is a blow-out quarter and shares don't retreat, or the retreat is so short-lived that investors can't' get back in in time.
Cramer said there's no doubt that Apple had a great quarter, and little doubt that their positive momentum won't continue. The stock is still dirt-cheap, he said, trading at just 12 times earnings despite an 18% growth rate. Cramer said he would rather sell other stocks in his portfolio on Tuesday so that they will have more money to buy Apple if a buying opportunity is created.
Cramer said his bottom line on Apple, it's still a buy and on any weakness, even more so.
New Generation Drug
"The patent cliff as arrive for big pharma," Cramer told viewers, and that means that the worst is now behind the drug makers as we enter 2012. Cramer explained that for years the markets have been fretting the $90 billion worth of drugs that will be losing their patent protection and going generic by 2015. But 2012 is the trough year when earnings will be lowest, he said, and that's the perfect time to buy in.
That's why Cramer recommended
, one of the biggest big pharma names, but also one with lots of potential for earnings growth going forward. He said that while many have been worried about
losing patent protection for its monster cholesterol-lowering drug, Lipitor, Merck has been quietly developing the next generation cholesterol drug and that drug is now in Phase III testing.
Cramer said that Merck's new blockbuster may still be two or three years away, but if successful, the drug could mean $5 to $10 billion a year for Merck's bottom line. In the meantime, the company still pays a hefty 4.3% dividend yield and recently raised that yield by 11%.
But there's a lot more to like than just cholesterol, said Cramer. Merck also has a strong pipeline of drugs in other areas as well, including treatments for diabetes, HPV and insomnia. The company has also been aggressive in its cost-cutting efforts as well. Cramer said Merck has delivered several quarters of solid executions and the company's recent dividend boost only exemplifies how confident management is in its prospects.
New Game Plan
Something is happening at
, Cramer told viewers, and his name is Ron Johnson. Cramer explained that the man that helped revolutionize
and create the winning retail strategy at Apple is now getting ready to work his magic on JC Penney and investors need to be in on the action.
Make no mistake, retail turnarounds are difficult, said Cramer, but Johnson has a lot of things going for him, said Cramer. First, he said the bar is set very low at Penney, making it hard for Johnson not to improve on the situation. Second, Cramer said that Johnson will likely implement everyday low prices, something consumers prefer over the phony "sales" that department stores usually offer.
Third, Cramer said he likes that Johnson has taken a 16% stake in
Martha Stewart Omnimedia
in order to secure Martha's merchandise. That may be bad news for
, who recently carried those item, but Cramer said it should work out great for Penney as Martha's merchandise has rarely been marketed well.
Cramer said that fourth, Johnson has charisma, and great people want to come work for him. That makes things exciting at Penney, he said, and Johnson is already off to a great start building a great team. Finally, Cramer noted that the time is right for Penney, as so many of their peers, like
have lost their way.
Cramer said he has no interest in trading shares of JC Penney, but as an investment over a 18-month timeframe, buying in now would make a lot of sense as Johnson begins to roll out his plans for the company.
Bright Natural Gas Outlook
In the "Executive Decision" segment, Cramer once again spoke with David Demmers, CEO of
, a stock that's up 16% since Cramer last spoke with Demers on Nov.16 and one that's tripled since Cramer first recommended it in January, 2010.
Demers said its a race to get products into the market now that natural gas has proven to be a low-cost, domestic competitor to foreign oil. He said that the industry still has a lot to do, but everyone from mining to shipping to even railroads are now exploring the possibilities of natural gas over diesel fuel. In the railroad industry in particular, Demers noted that Westport's first prototype locomotive will be in use in Canada by year's end.
Demers was also upbeat about
, an oil service company that's going 100% natural gas for its fleet of trucks. He said that it's a win for both Heckmann and their customers, and it only makes sense for oil and gas companies here in the U.S. to use their own product for their vehicles going forward.
Overall, Demers said that there are a lot of people that use a lot of fuel here in the U.S., and as more natural gas vehicles are produced, the prices will come down, making them even more affordable. Once that happens, he said, the industry will be able to address more and more of the market. For heavy trucks in particular, Demers said the estimates are that 20% to 30% of all trucks could run on natural gas over the next five to 10 years.
Finally, when asked about another equity offering in the future, Demers said that Westport prides itself on being first and being a leader in the markets it serves. He said that all of the company's previous equity offerings have been for specific purposes and right now the company doesn't need any additional money for its existing opportunities.
Cramer continued his praise for Westport and for the entire natural gas industry as a clean, domestic alternative to foreign oil.
Cramer was bullish on
Nordic American Tanker
He was bearish on
Slim Turnaround Chances
In his "No Huddle Offense" segment, Cramer questioned the possibility of a turnaround at
Research In Motion
( RIMM). "Why do people keep betting on these turnaround?" he asked.
Cramer said turning around a tech company is no small feat. Sure both of these companies have monster legacy businesses and dirt cheap share prices, but in order to truly turn them around, management needs to revamp their products, reinvigorate their sales teams and above all outsmart the competition, which has already proven they're better and not standing still.
Cramer said for Yahoo! and RIM, it's too little, far too late. The world wants mobile, social and the cloud, he said, and these two companies aren't delivering on any of these fronts. The world wants innovation, he said, and these new CEOs don't have what it takes.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was long Apple.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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