Cramer's 'Mad Money' Recap: The Beauty of Diversification (Final)
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After today's somewhat confusing employment number, Jim Cramer told the viewers of his "Mad Money" TV show that diversified portfolio is the way to play the markets going forward.
He said investors need to understand the context of employment number to really understand where the markets are headed.
Cramer said today's employment number was all about expectations. The top line under of 9.4% unemployment is indeed a bad number, he said, but it's far better than the garden variety depression many experts forecast just a few month ago.
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Cramer said American business took swift action last year when they saw the economy worsening. They laid off huge numbers of people fast to save their bottom lines. Now, with the government's handling of Chrysler and GM also going better than expected, the worst is likely behind us, he said.
According to Cramer, the recession is not over, which is why he continues to recommend sticking with the leaders that have been working, mainly the banks, oils, tech and now aerospace.
In these groups, Cramer likes
JPMorgan Chase
(JPM) - Get Report
and
Conoco Phillips
(COP) - Get Report
, two stocks which Cramer owns for his charitable trust,
Action Alerts PLUS, along with
Apple
(AAPL) - Get Report
and
Boeing
(BA) - Get Report
.
Cramer also recommended adding a few defensive names to investors' portfolios, names like
Agnico-Eagle Mines
(AEM) - Get Report
for gold exposure, and
Johnson & Johnson
(JNJ) - Get Report
and
Colgate-Palmolive
(CL) - Get Report
.
By using a diversified portfolio, Cramer said investors will find themselves at a great place in a confusing market.
Tech Plays
There are lots of ways to play the booming rally in technology, Cramer said.
He said investors can go with the big bellwethers such as
Apple
(AAPL) - Get Report
or
(GOOG) - Get Report
. They can choose one of Cramer's small, speculative picks like
Tessera
(TRSA)
,
Ciena
(CIEN) - Get Report
and
Brocade
(BRCD)
, which are up 34%, 12% and 27% since Cramer's last mention. But there's also money to be made at the heart of tech as well, he said.
Cramer recommend wireless communication chipmaker
Broadcom
(BRCM)
as another way to profit from the tech rally.
He said Broadcom makes the chips in the hottest gadgets, including wireless handsets, cable set-top boxes and networking devices. And with only 5% of the company's sales coming from cell phones, it has a lot of room to grow, he added.
Broadcom should benefit from the adoption of "combo" chips, which include multiple services, like bluetooth, wifi and FM radios, all on a single chip. Currently only 5% of cell phones have combo chips, but it's estimated that 75% of phones will have the smaller and cheaper chips over the next few years, he said.
Cramer said Broadcom should continue to prosper with the proliferation of the mobile Internet. He said he also likes the company's bid for
Emulex
(ELX)
.
Speculative Stock of the Year
In a bold and unexpected call, Cramer named student loan giant
SallieMae
(SLM) - Get Report
as his speculative stock of the year.
He said while many are already writing the obituary for this once great company, the stock has simply gotten too low for all the wrong reasons.
According to Cramer, SallieMae has fallen to just $6 a share based on comments from President Obama that he may abolish the private student lending in favor of a government run program through the Department of Education. In addition, the credit agencies has lowered the company's debt ratings.
But Cramer pointed out that SallieMae currently has $2 of earnings power and is trading at just 3 times earnings. Even if the company were to close up shop today, he said, it still has $14 to $15 a share worth of run off value from its loans already on the books.
Cramer said even if Obama has his way and takes over student loan originations, there will still be a need for loan services and debt collection, two businesses SallieMae does better than anyone. In reality, he said, most colleges are not prepared to provide direct financing, making Obama's plan very unlikely to materialize, he said.
Cramer predicted shares of SallieMae could double in the coming months, thus making it worthy of his speculative-stock-of-the-year title.
Lightning Round
Cramer was bullish on
Aluminum Corp of China
(ACH) - Get Report
,
Anadarko Petroleum
(APC) - Get Report
,
Travelers Companies
(TRV) - Get Report
and
Eli Lilly
(LLY) - Get Report
.
He was bearish on
Wells Fargo
(WFC) - Get Report
,
Chesapeake Energy
(CHK) - Get Report
,
Hartford Financial Services
(HIG) - Get Report
and
Pfizer
(PFE) - Get Report
.
Check out the latest edition of
"Cramer's Take onTop-Searched Stocks" on Stockpickr.
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.
Read more of Cramer's Mad Money Lightning Round insights
.
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At the time of publication, Cramer was long JPMorgan Chase, ConocoPhillips.
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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