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NEW YORK (
) -- When it comes to predicting stocks on Wall Street "the facts always win," Jim Cramer told the viewers of his
TV show Thursday.
He then explained how the retail sector, a group thought to be held hostage by the grips of $4 a gallon gasoline, was able to roar higher today on spectacular earnings.
Cramer said events like what the retail stocks were able to pull off today come down to one thing, expectations. He said Wall Street portfolio managers all have what he called a "world view," a vision of the future that includes estimates for things like interest rates, commodity prices and unemployment. Based on this world view, managers then discern which sectors of the economy will likely flourish and which will suffer given those conditions.
In order for money managers to beat the
benchmark, Cramer explained, they must underweight the sectors that they feel will underperform and overweight those that will outperform. In the case of the retail stocks, everyone knew things would be tough, so analysts lowered their expectations well in advance of earnings, making it easy for retailers to surprise to the upside.
Which all leads to today, when money managers caught off guard by upside surprises needed to do some emergency buying to capitalize on strength of a group they all buy left for dead. Cramer said that's why
Bed Bath & Beyond
was up five points today, and why
was up three.
Cramer said it's also why there was strength in everyone from
. He said these gains may seem counter- intuitive at first, but in the eyes of money managers caught off guard, it all makes perfect sense.
Best of Timber Stocks
The price of timber is on the rise, Cramer told viewers, thanks in part to strong demand from China, a looming $300 billion rebuild coming from Japan and a Canadian pine beetle that's wiping out that forest-rich country's timber assets.
But which of the four U.S. timber REITs should investors choose? Cramer took a look at
Plum Creek Timber
Of the bunch, Cramer said he like WeyerHaeuser the best. He said the company yields only 2.5% but offers a strong management and balance sheet and is also ideally positioned in the Northwest U.S. to benefit the most from increased timber exports to China and Japan.
Cramer said that Rayonier has 2.5 million acres of timber land, pays a bigger 3.4% yield and also has business in Japan, but would only be his second choice, as the company also has lands in the Southeast U.S. which are not suited for export.
Plum Creek Timber also seems like a logical choice, with its 3.9% yield and the fact that the company is the largest landholder in entire U.S., but Cramer said the company is not ideally suited for export, and is too tied to the ailing U.S. residential construction market.
Finally, there's Potlatch. Cramer said this company's 5% yield is a red flag and could be cut in the future. He said while Potlatch might be a takeover candidate, he feels the company has land in all the wrong places and doesn't have the solid fundamentals he's looking for.
Cramer said some investors might be tempted to buy the
iShares S&P Global Timber
ETF, which tracks 24 timber companies, but as with all ETFs Cramer asked "why own the good with the bad?"
S&P Biggest Winner, Loser
In the Thursday "Sell Block" segment, Cramer examined the biggest winner and the biggest loser, in the
last quarter to see which one should be bought and which one should be sold.
It turns out that refiner
was the winner of the quarter, up 45%, while employment website
pulled up the rear with a 33% decline.
Cramer said he'd be a seller of all of the oil refiners, but only after they report what will likely be "better-than-expected" results. Cramer said the disconnect in crude prices that's helping refiners book record profits can't last forever, and as gas prices remain high, drivers will be forced to drive less this summer. Only
, a turnaround story, received a pardon from Cramer's sell block.
But what of Monster Worldwide? Cramer said the company did indeed lose 33% of its value when it reported, but those results were still in line, just not spectacular. With unemployment beginning to fall and job listings likely to increase, Cramer said he sees a bullish trend for Monster. The company trades at just 20 times earnings, but has a 20% long-term growth rate. He said shares of Monster will likely snap back soon, and he'd be a buyer.
Cramer followed up on some stocks that stumped him during earlier shows. He said that
, which makes robotic arms used in knee surgery, is too red hot and he'd rather own
, Cramer said the company has sufficient cash to cover its 6.3% dividend yield, but the company likely won't grow until 2012 when new ships come online.
Next, Cramer said that
, which is developing a cancer treatment, is too binary. It either gets FDA approval and wins big or fails miserably. Cramer said he doesn't like the risk reward.
When asked about the Bakken shale region of North Dakota, Cramer said he still likes
. When asked about
, Cramer said he feels the company is an outlier since
delivered a good quarter.
Finally, when asked to opine on
( BRK-B) and
, Cramer said he's still a believer in Warren Buffet but has missed the move in Georgia Gulf.
Cramer was bullish on
First Republic Bank
SPDR Gold Shares
Enterprise Products Partners
He was bearish on
In his "No Huddle Offense" segment, Cramer defended his recent bearishness on the tech sector. He said when the facts change, he has no choice but to change his mind.
Cramer said many investors have expressed anger over his abandonment of the sector, but he said his job is to recommend stocks that are going up and not to recommend ones that are likely to go down or stall.
When it comes to the tech sector, Cramer said sales are seasonal, and are prone to other factors. So when companies report weakness or there's a reported glut in tablets that are not iPads, he has to be truthful.
"Im not here to hold hands," said Cramer. While selling tech may result in some losses, not selling them may result in far worse losses, he added.
--Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer was not long any stock mentioned.
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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