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With oil prices down, investors should look for stocks that are too cheap compared with others in their sector, Jim Cramer told viewers of his "Mad Money" TV show Wednesday.
To this end,
is a smart play.
Gardner Denver makes compressors, blowers, and vacuum pumps that aid oil companies in cleaning wells before drilling. The parts Gardner Denver makes can also be used to clean up industrial waste, so it isn't a pure oil play but ought to benefit when oil prices rebound.
Compared with similar stocks such as
National Oilwell Varco
, Gardner Denver's multiple is too low.
"We're in a huge period of capital expenditure for companies that need to get oil," Cramer said. When oil prices go up, Gardner Denver's stock should rise. Additionally, the company generates 50% of revenue from sales outside of America, meaning it's not entirely dependent on the American consumer.
"Earnings estimates that are too low breed higher stock prices," Cramer said. Because a large proportion of its international earnings come from the European Union, Gardner Denver makes money abroad that will convert to dollars at an incredibly generous rate. A top-tier company in all the markets it serves based on market share, Gardner Denver is a good buy, Cramer said.
In the News
Cramer took a moment to look at two pieces of this afternoon's news. If
labor deal is approved and Warren Buffett takes a stake in
( BSC), Cramer said the
should reach 14,548, as he has predicted.
The second oil-sector play Cramer recommended was with Canadian energy trusts. Thanks to the Canadian government's recent decision to tax these companies, there has been a selloff of Canadian energy stocks. Those taxes hurt the companies' stocks, but they the oil fields they control, Cramer said.
Foreign companies are starting to buy the Canadian energy trusts. Abu Dhabi National Energy Co. bought Canada's
at a huge premium of 33%.
Cramer noted out six stocks that are in a similar position to Primewest:
Provident Energy Trust
Advantage Energy Income Fund
Cramer stacked these six stocks against the Primewest takeover, concluding that Baytex has the largest upside at 47% from its current quote.
The Abu Dhabi deal means that Arab companies are betting that natural gas is undervalued, and Cramer assured viewers that there will be many more acquisitions in the Canadian energy trust space.
Genesis Lease CEO Speaks
Cramer welcomed John McMahon, CEO of
( GLS), back to the show, asking what it means to investors that Genesis bought planes after the markets closed today. McMahon replied that the expenditure of $380 million in additional aircraft increases Genesis' base rental by 30%. He said that analysts should raise their prices and that the stock's dividend "just got a lot safer."
Cramer recommended Genesis at $23 a share.
During his "Sudden Death" segment, Cramer was bullish on
Life Partners Holdings
'Am I Diversified?'
In his "Am I Diversified" round, Cramer's first caller asked if he was diversified with the five following stocks:
Cramer said that Nabors overlaps with Exxon: "I cannot bless this." He recommended that the caller part with Laboratory Holdings and Nabors and pick up a defense stock and a diversified industrial, perhaps
, which he owns for his charitable trust,
Action Alerts PLUS.
Cramer's next caller asked about
Chicago Bridge and Iron
Cramer said that NYSE, which he has in his charitable trust, is the worst-performing stock of the best-run company he knows. He recommended the caller get rid of NYSE.
Cramer's third caller asked about
Bank of America
( PCU), Pfizer
Enterprise Products Partners
Eagle Bulk Shipping
Cramer instructed the caller to "get out of Pfizer," but that otherwise the portfolio was well diversified.
Cramer was bullish on
Companhia Vale do Rio Doce
( XTO) and
Cramer was bearish on
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At the time of publication, Cramer was long Caterpillar, NYSE Euronext, Sears Holdings and XTO Energy.
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