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NEW YORK (
) -- "Stop, look and listen" was Jim Cramer's cautious advice to
viewers Tuesday during what's turning out to be a volatile earnings season.
Cramer said the stock movement of companies such as
Johnson & Johnson
, which he owns for his charitable trust,
Action Alerts PLUS, exemplifies why it's too risky to trade during earnings season. Investors are trading on every bit of news, even if its totally wrong.
Cramer said he initially saw nothing wrong with Verizon's earnings release this morning, yet the earnings were reported as a "miss" and shares sank. During earnings season, he explained, there's no room for just "OK" -- you're either great or you're dead in the water. Yet, by the time the company conducted its conference call and reassured investors margins would be improving this year, shares rallied.
The same was true with Johnson & Johnson, said Cramer. The company issued better than expected results, only to see shares sink on perceived weak guidance. But shortly thereafter, investors focused on the right metric -- the company's spinoff of one if its divisions -- and shares shot right back up.
DuPont was yet another example; that stock was down in the pre-market, only to end up 1.7%. Cramer said with results like theses, it's impossible for him to say whether a stock will be going up or down based on earnings. That's why he continues to caution investors that earnings season is the worst time to try and make money in the markets.
Off the Charts
In the "Off The Charts" segment, Cramer went head to head with colleague Carolyn Boroden over the chart of
to see if Boroden can continue her winning streak at predicting where the index is headed.
Cramer reminded viewers that Boroden successfully called the top in the S&P back in September, along with the lows in mid-November. With the index now approaching her latest target of 1,510, Cramer wanted to know what was next.
According to Boroden's analysis, if the S&P can rise above her 1,510 target, the next stop won't be until 1,551 to 1,555. She said the weekly chart of the S&P also has a cluster of ratios that fall into the same range. Boroden noted that only if the markets fall below the November lows of 1,343 would she be concerned.
Cramer said he agrees with Boroden's research, especially given how she's nailed all of her S&P targets over the past few months. He said the markets may pull back soon after their big run to the upside, and that would be the perfect time to buy into the markets.
A Strong Defense Stock
With defense budgets likely to shrink in the coming years, Cramer said there's one defense stock that gives investors multiple ways to win.
, which makes everything from small-caliber ammunition to rocket propulsion systems and satellite components, would make an excellent takeover target. Its existing business isn't half bad either.
Cramer said it may be hard to talk about a stock that makes ammunition with the debate over gun violence raging, but in the case of Alliant the company is mainly a military supplier that also makes some smaller-caliber ammunition.
That said, Cramer noted Alliant's business is on fire, delivering a 41-cent-a-share earnings beat while upping guidance and boosting its dividend to 1.6% at the same time. Currently, Alliant has a $6.4 billion backlog of business, which proves its fundamentals are in excellent shape.
But despite all of these positives, shares of Alliant still trade at a 37% discount from their five-year historical valuation, which would make them an excellent takeover target in an industry that will be starved for growth going forward. If the company were to be taken over at 1.5 times sales, that would yield a 123% return, noted Cramer. But even based on historical valuations, the stock should be trading at least 9% higher than its current 52-week high.
In the Lightning Round, Cramer was bullish on
Cramer was bearish on
All in the Packaging
There's a stealth bull market in packaging, Cramer told viewers, and that's why the stocks of
have both been outperforming the markets. Cramer said that rally is likely to continue, which is why he's bullish on both names.
When it comes to packaging, and food packaging in particular, Bemis is the market leader and has a 2.8% yield. Berry, on the other hand, came public just last October, with horrible results. However, shortly after that horrendous IPO, shares of Berry also began to rise.
Cramer explained that while food packaging might seem boring, there's actually a lot of innovation involved because new packaging drives sales and helps food last longer. When you see the new
"Dip & Squeeze" ketchup packets, those were created by Bemis.
With input costs falling along with the price of natural gas, Cramer said both companies will see their businesses continue to grow. Thus, the question becomes which company is right for your portfolio?
Cramer said for those with a higher risk tolerance, Berry is better bet because that company has higher upside. However, the company also has $4.5 billion in debt, with $2.1 billion coming due in 2015. In addition, the company still has sizable private equity investments that could be sold at a moment's notice, sending shares lower. That's why Berry trades at just 13 times earnings, noted Cramer.
So for those investors who like to sleep at night, Cramer said to stick with Bemis, which trades at 15 times earnings with a 7% growth rate and a 2.8% dividend.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer recounted his "rant heard around the world," which aired on August 3, 2007. In that famous "they know nothing" outburst, Cramer said he was merely trying to wake the
into cutting interest rates and cutting them fast in order to save financial firms and mortgages alike.
However, in a recent release of the Fed's meeting notes, it was discovered that Cramer's rant was indeed discussed, but only to poke fun at someone who was clearly not a "fan" of how they were handling things.
Cramer said he's mentioning the rant not to prove he was right, but to ask the question of how his contacts were so much better than the Fed? How did he see what was coming while the Fed clearly did not?
He said in all likelihood, banks are afraid to tell the Fed when bad things happen for fear of reprisal or shaking confidence. But no matter what the reason, the Fed clearly spoke to the wrong people and should've known better and acted sooner to save the economy, the financial system and countless mortgages.
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-- Written by Scott Rutt in Washington, D.C.
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At the time of publication, Cramer's Action Alerts PLUS had a position in DD.
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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