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NEW YORK (
) -- The debate over what type of recovery was at the heart of today's selling in the markets, Jim Cramer told the viewers of his "Mad Money" TV show on Wednesday.
According to Cramer, the key to the market's direction is spelled "LUVWM," an acronym which spells nothing, but illustrates the different types of recoveries the markets might have.
An "L" shaped recovery isn't a recovery at all, he said, but just a "down and out" pattern in the markets, he said. A "U" shaped recovery is gradual, gentle recovery, while a "V" is a sharp snap back to prior levels. More complicated are the "W" and "M" shaped recoveries, which predict multiple rises and falls in markets.
Which kind of recovery is the market going to have? Cramer said he has no idea, but said that all these letters spell only one thing, and that's diversification. He said investors need a portfolio that will prosper no matter what letter recovery the market has in store.
For a "L" recovery, he would look at consumer stocks like
, a stock which he owns for his charitable trust,
Action Alerts PLUS.
For a "U" shaped recovery, Cramer likes natural gas stocks such as
, while for a "V" he likes the industrials companies like
, another Action Alerts Plus name.
For a "W" recovery, Cramer said he'd also stick with industrials like Emerson, but for an "M" recovery, he'd stay in gold, with stocks like
Only through a diversified portfolio like this one, he said,will investors stay ahead of the markets.
Keys to Success
Cramer spoke with Robert Pullen, president and CEO of telco equipment provider
, to see if that company's 46% upswing since Cramer last mentioned the stock on Dec. 12 can continue.
Pullen said that Tellabs is innovating and redefining itself to help both itself and its customers succeed. He said the company is focused on the mobility space, which fits in well with Cramer's mobile Internet thesis.
Pullen also said that Tellabs is expanding globally, with 40% of the company's revenues coming from outside the U.S. He said the company is investing more in developing regions, such as China and Brazil.
Also working in the company's favor are struggling competitors like
, which is allowing Tellabs to win new customers.
Cramer said everyone needs more broadband, and called Tellabs in the "sweet spot" of many growing market segments. He said he wouldn't sell a share of the stock and would "buy, buy, buy" at under $6 a share.
Cramer turned to Norway for the next recommendation in his "foreign legion" portfolio of international stocks offering protection against the ailing U.S. economy. He said that Norway's
is the next company to enter his legion of high growers and high-dividend payers.
Statoil is the sixth largest oil company in Europe, said Cramer, offering everything he likes to see in an oil company, including strong production growth, a high drilling success rate, exposure to higher oil prices and a juicy dividend.
Cramer said that Statoil is solid performer on all fronts, with aggressive cost cutting lowering the company's production costs by 25% this year. The company's 4.4% dividend yield may not be as high as others, he said, but the company's cash flows make it a safe bet for investors.
Cramer said Statoil is also highly levered to the price of oil, with every $1 change in the price of crude turning into 3.1% higher profits for the company. That, combined with a falling dollar, makes Statoil's growth prospects even larger, he said.
Am I Diversified?
Cramer played "Am I Diversified" with callers to see if their portfolios have what it takes. The first caller's portfolio included:
Nordic American Tanker
Energy Transfer Partners
Bank Of America
Cramer called this a "monster" portfolio with great diversification.
The second caller's top holdings included
International Game Technology
Global Cash Access
Cramer said this caller knew how to play the game as he blessed this portfolio as diversified as well.
In a final note, Cramer said in the battle between the bulls and bears over the earnings from
, a stock which he owns for his charitable trust,
Action Alerts PLUS, he's siding with the bulls.
Cramer was bullish on
Smith Micro Software
First Niagara Financial
He was bearish on
-- Written by Scott Rutt in Washington
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At the time of publication, Cramer was long Pepsico, Emerson Electric, Bank of America.
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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