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"Yesterday was only the beginning," Jim Cramer said of April 25, the day the
Dow Jones Industrial Average
closed above 13,000 for the first time in its history. "We're sitting on top of a major move up," Cramer told viewers of his "Mad Money" TV show Thursday.
Market players have not yet missed the rally, but if they're going to be "running with the bulls," they need to know what will work and what won't, he said. "My job is to tell you why we're going higher and what you should back up the truck for" -- that is to say, which stocks you should load up on.
The great earnings numbers that have been coming out are what pushed the market higher on Wednesday and today, but that's only part of the story, he explained. The real reason these companies had such good earnings in the first place is that the estimates were set too low.
There has been "a pervasive sense of gloom" on Wall Street with the housing downturn and the Democrats taking over Congress, Cramer said. As a result, hedge funds were shorting stocks such as
, but the short positions turned on them.
These stocks, he said, are becoming "consistent and worth owning." Right now the estimates are being recalculated and stocks are getting revalued, Cramer explained. "This is why the stock market should still go higher."
While there are some stocks that have peaked, there is a lot that is still working, he said. In the health care sector, Cramer named
as "great" plays.
Among the oil drillers, Cramer likes
, both of which he owns for his
Action Alerts PLUS charitable trust. Cramer also said he's not ruling out the other drillers, as long as they are not totally based in the U.S.
, he said, is another "great stock that doesn't get enough love," and he predicts that
is going to $80. Caterpillar, which Cramer also owns for his charitable trust, closed at $73 on Thursday.
He said he also likes biotech stocks such as
In addition, "boring" companies such as
and brokerages such as
, another name he owns for Action Alerts PLUS, are working, too, Cramer said.
The stocks he named for his Benefit of the Doubt and Green Day series all work as well, he said. "The upside is still immense," he said. "There is a lot to like."
As a reminder, these are the stocks in those series:
Benefit of the Doubt Stocks
- VF Corp (VFC) - Get V.F. Corporation Report
- J.C. Penney (JCP) - Get J. C. Penney Company, Inc. Report
- Federated Department Storesundefined
- Kohl's (KSS) - Get Kohl's Corporation (KSS) Report
- Costco (COST) - Get Costco Wholesale Corporation Report
- Polo Ralph Lauren (RL) - Get Ralph Lauren Corporation Class A Report
- Saks (SKS)
- Sears Holdings (SHLD)
- RadioShack (RSH)
Green Day Stocks
- Shaw Group (SGR)
- Foster Wheelerundefined
- First Solar (FSLR) - Get First Solar, Inc. Report
- MEMC Electronic Materials (WFR)
- BorgWarner (BWA) - Get BorgWarner Inc. Report
- Tetra Tech (TTEK) - Get Tetra Tech, Inc. Report
- Om Group (OMG)
- Fuel Tech (FTEK) - Get Fuel Tech, Inc. Report
Two Retail Takeover Ideas
One of the big drivers of the market is the excess private equity money floating around, Cramer told viewers. However, people should never speculate on takeovers when the fundamentals of a company are bad, he said.
Usually stocks that do get taken over pay a 20% premium to their shareholders. Cramer has in mind two stocks that he believes would make "fabulous" private equity acquisitions:
Both of these companies, he said, have "strong" cash flows, and there is something wrong but easily fixable with each company. This is what private equity funds look for, Cramer said.
Ross Stores is "sitting on a mountain of cash" with not a lot of debt; and while its business is "fundamentally sound," it does have some problems, he said. Ross' operating margins have fallen over the last few years because of systems problems and shrinkage issues.
To fix the company's operating margins, all private equity guys would need to do is fire people and shut down less-profitable stores, Cramer said. Ross Stores is cheap and is a stock people should consider buying.
But if Ross Stores is a private equity dream, then TJX is a private equity heaven, Cramer said. TJX generates plenty of cash but is focused on growth. It is "sacrificing" its margins because of growth to please analysts and money managers, he said. This is the "perfect PE situation." Private equity guys could come in and close down a bunch of underperforming stores, Cramer said.
As public companies, TJX and Ross Stores can't do what they need to do, and they could "easily" get taken private, he said.
Sell Block: Stocks Released
In the show's "Sell Block" segment, Cramer explained that when a stock he doesn't like goes higher, he likes to be corrected. This is what happened with
, he said.
Cramer said he's been saying the company's CEO, Samuel Palmisano, has to go. In fact, he even put Palmisano on his "CEO Wall of Shame." But now Cramer said he is ready to apologize to the chief executive.
IBM's recent move was so "positive and unexpected" and its dividend hike is a "wake-up call," he said. "I was wrong about IBM."
Companies that lack long-term conviction often hide behind stock buybacks, but a raise in dividend is different, he said. "I would buy IBM." Going forward, it will no longer be one of the worst-performing stocks of the Dow, Cramer said.
Amazon is another move Cramer said he missed. Now the company has cut spending and looks like it's in the game to win, Cramer said, before releasing the stock from the Sell Block.
He made the same mistake with
, which blew away the quarter and its guidance, he said. This stock should also go higher.
"It can be irresponsible to be too negative, and on Riverbed and Amazon I was irresponsibly negative," Cramer said.
Moving on, he suggested investors take some
Portfolio Recovery Associates
off the table because the stock is up 30% since he said he liked it last month.
Also take some profits in
, Cramer advised.
Solid Gold Grower
Tye Burt, president and CEO of
, joined Cramer on the show by telephone and said he feels his company's "growth has to start with solid reserve base."
Right now, the CEO said, Kinross is standing on 45 million ounces of gold, 70 million ounces of silver and 3 billion pounds of copper. "We're going to grow that production base off that reserve base by 60% over the next two years."
When Cramer asked Burt to give him a sense of what Kinross makes off an ounce of gold, Burt said the company's average selling price is what the gold price is and that it costs Kinross around $335 an ounce to get it out of the ground. The margin between the selling price and the production price is its cash flow, Burt said.
"Last year we doubled our cash flow," and it is going to go up again, he continued.
Cramer advised his viewers to take a look at Kinross, if they feel
has gone up too much.
To view Cramer's interview with Tye Burt, please click here.
During the show's "Sudden Death" round, Cramer was bullish on
He was bearish on
Cramer was bullish on
Cal Dive International
Archer Daniels Midland
Cramer was bearish on
Krispy Kreme Doughnuts
For more of Cramer's insights during the Lightning Round, click here
Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by
At the time of publication, Cramer was long Caterpillar, Goldman Sachs, Halliburton, Sears Holdings and Transocean.
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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