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The Rubber Match
The best way to make money is to find the patterns that send stocks into bull mode, Jim Cramer told "Mad Money" viewers Friday, and that's why he said to take a look at
To identify the winning formula that will push Rubbermaid higher, Cramer said to look no further than
, a company that went from $22 to $34 a share in just about a year.
The stock jumped 55% in a matter of months, and Cramer said the H-P story "has gold in it."
For starters, the pattern begins with a great company that ousts a bad chief executive, he said. In the case of H-P, it got rid of Carly Fiorina and replaced her with Mark Hurd, a man who had the potential to turn the company around.
The other key to H-P's winning formula was low expectations, he said, because no one thought Hurd would salvage the company so quickly. That allowed people to get in before the stock jumped, Cramer said.
The same pattern is being repeated at Newell Rubbermaid, a company Cramer said has fabulous brands and has already gotten rid of a bad CEO.
And now the company's acting replacement, Mark Ketchum, has announced that he will stay on as chief executive.
Cramer said that his record makes you want to get behind him, since he spent three decades at
Procter & Gamble
PG, which he called "the greatest training ground on earth."
He also said that there are "low expectations in spades, with analysts saying that when commodity costs come down and when the restructuring begins to pay off that the company might be a buy.
But Cramer said that if investors wait for that stuff to happen, by then the stock will be up so huge that it will be too late.
Cramer said that for the big payoff, it's a good idea to get in at $24. Plus, the company pays a 3.6% dividend so that you get a little something as you wait for the stock to rise, he said.
Because there are thousands of publicly traded companies and no way to keep track of them all, it means that a lot of small- and mid-cap stocks just don't get much attention, Cramer said.
These are places where you can actually make some money, he said, because when good news happens to them there is no immediate market response.
On that note, he turned his attention to
, a stock recommended to him by Michael Comeau and Will Gabrielski, who write
Cramer said that DRS was just awarded $87 million in new contracts from the Pentagon, an order that wouldn't matter much to a company the size of
But for a company like DRS, which he said is a $2 billion company, this is substantial. Cramer added that this latest contract is equivalent to 22% of its third-quarter sales.
DRS makes helicopter sighting support systems and infrared sighting systems for tanks and fighting vehicles, and Cramer said that more contracts will come because these are areas that the army has decided to spend a fortune on.
Going for Gap
Cramer went positive on
, a stock that he's hated, saying that it now has a story that could make investors who get in now a lot of money.
Even though he said that the stock is "practically a joke" and that Gap stores have been beaten up by
, Cramer said that the key to the company's success lies in the turnaround at the
Cramer believes that Old Navy will report positive same-store sales growth in March because management has cut lead times down on its fashions. "That means they'll finally have the right stuff for spring," he said.
When a bad retailer cuts down on lead times and fixes its products, that retailer recovers and it's time to buy the stock, Cramer said.
Once Wall Street starts to do the arithmetic, it will see 5% of upside to Gap's margins and better quarterly earnings, thanks to Old Navy, and even if the stock only goes to $22 from $18, that's still a huge jump, Cramer said.
And he believes the company has also made some good hiring decisions.
Plus, Cramer said there's not a lot of downside since the company "is not capable of doing worse than it's doing now."
Finally, Cramer said he had to clarify his position on
. He bagged the company during a lighting round, which was an inconsistent call.
So he welcomed Remi Barbier, the CEO of Pain Therapeutics, to talk about the company's latest moves.
Pain Therapeutics is working on a painkiller that causes less physical dependency, as well as an abuse-resistant version of an existing drug, Barbier said.
The company has also partnered with
to make painkillers, the chief executive said.
Cramer asked if the stock is stagnant because it's not getting analyst coverage.
Barbier said that while that could be one reason, he reminded Cramer that it takes time for these stories to catch investor attention.
He added that Pain Therapeutics doesn't need to raise any more cash, because they have over $200 million of cash on the books and a very low burn rate.
Cramer was bullish on:
Cramer as bearish on:
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At the time of publication, Cramer was long Procter & Gamble.
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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