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Stocks that go to $80 a share in a bull market tend to go to $120, as long as the bull market keeps going, Jim Cramer told viewers of his "Mad Money" TV show Monday.
Although this thesis might seem "totally bogus," Cramer said he has the empirical data to prove it is correct.
Larry Tisch, one of the great investment minds of his generation, was mystified by the "runaway bull market" of the 1980s, Cramer said. Tisch liked "out-of-favor assets" in which he could take a longer-term view and make billions, but at the same time, he didn't like to miss out on easy money, Cramer said.
When Cramer was young, Tisch asked him what he liked in the market. Cramer told Tisch at the time that stocks were in a "dramatic" runaway bull market and that people had to be in the most-obvious stocks because they were the ones going higher.
He said he told Tisch he liked stocks that were at $80, and when Tisch asked why, Cramer told him that stocks that go to $80 go to $100. Further, if they go to $100, they tend to go to $120.
Even though Tisch laughed at Cramer then, the next time Tisch saw him, Tisch told Cramer that he had been keeping track of his thesis and it was working.
Leading stocks attract money, and money sends them higher, cementing their status as leaders, Cramer explained. This keeps the virtuous circle going.
Right now, we're in a runaway bull market, and Cramer believes his rule of thumb in 1984 should work just as good now as it did then. In fact, looking at just last year, it seems his theory was proven right in the
Cramer urged viewers not to assume that
is played out. All the good news is not priced in yet, Cramer said. The stock is a leader and "has the potential to climb to $120." Boeing closed at $99.90 on Monday.
On "Mad Money" there is no distinction between "hard-earned money" and "easy money," Cramer told viewers. "A win is a win."
However, his $80 stock rule doesn't mean people should skip out on doing their homework, he said. Instead, when using this thesis, people should do even more homework.
CAT's All That
, said Cramer, is another stock he sees going to $120 as long as the bull market sticks around. Caterpillar, which Cramer owns for his charitable trust,
Action Alerts PLUS, closed at $79.83 Monday.
Right now Caterpillar is at the low end of the leadership range, but like Boeing, it belongs to one of Cramer's five wild bull markets, he said. The analyst who covers Caterpillar for UBS downgraded the stock last week, but that was a wrong move, Cramer said. "This guy obviously didn't get the $80-to-$120 memo."
Moreover, although Caterpillar may look expensive, it's actually cheap, he said. Plus, it has a lot of exposure to the rest of the world, including serious growth potential in China. With its China business, Caterpillar should stay "immune" to its crummy business in the U.S, Cramer said.
Uncertainty is keeping people out of the stock, but Caterpillar reminds Cramer of the winning stock
when it was at $72, he said. Investors should consider getting in.
In an article titled "This Land Was My Land," published last month in
The New York Times
, columnist Timothy Egan writes about how the Bureau of Land Management was told early on in the Bush years to make drilling for oil and gas its main priority, Cramer said.
People can be like Egan and "bemoan the state of things" or be Democrats and seek to change things -- or they can be like Cramer and find out who is benefiting from this. Because when the environment is compromised, someone is always benefiting, Cramer said.
Drillers such as
have been held back because they aren't allowed to drill throughout the year, Cramer said. But now, with a decision of year-round drilling looming, these two are cheap, he said.
This approval should give UPL and STR the potential to take off, Cramer said. Of the two, UPL is more speculative, as it has exposure to China and not too much other international exposure, Cramer pointed out. Drilling times have improved, and now it's time to consider getting into STR or UPL.
Aecom Has Buying Power
John Dionisio, president and CEO of
, joined Cramer on his show, where the chief executive told viewers that ACM has been in the environmental business for 100 years.
A total of 40% of ACM's revenue is generated outside the U.S., and as the technical services company is involved in an industry in which there is major consolidation activity, Dionisio reassured Cramer that there are plenty of companies left for ACM to buy.
Cramer said people "need" a stock such as ACM, and he told viewers to consider getting in.
To view Cramer's interview with John Dionisio, please click here.
Cramer was bullish on
Eagle Bulk Shipping
Helmerich & Payne
Cramer was bearish on
Smith Micro Software
Discover Financial Services
The Blackstone Group
During the "Sudden Death" round, Cramer was bullish on
. He was bearish on
Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by
For more of Cramer's insights during the Lightning Round, click here
At the time of publication, Cramer was long Caterpillar and Goldman Sachs.
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