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NEW YORK (
) -- The market will rally a little bit from here until the short sellers return, Jim Cramer told viewers of his
TV show Monday.
Cramer said today's midday rally made perfect sense, as stocks have already been beaten and crushed so low that simply can't go much lower. "There's nothing worth selling at these levels," he said. And the chatter of a second market crash? Cramer said that's almost always a sign we're nearing a bottom.
So with valuations where they are, Cramer said a small "rebuilding" rally is very likely, with the hardest hit stocks likely to bounce the most. He said that with low interest rates, gridlock in Washington, DC, and so many mid to high-yielding stocks out there, the market will be hard pressed not to rally from these levels. But what then?
Cramer said the short sellers will return for another round, as they often do in a range bound market. Any stocks that are bought now, he said, will have to be sold later when they arrive. He said the only stocks the shorts aren't likely to attack are those paying high dividends, those likely to be taken over and those that do well with low interest rates.
Cramer said normally the stocks that fit this bill are the financials and the tech stocks, which combined make up 35% of the
But with banks under pressure from the
Cramer said they aren't likely to merge or payout dividends, leaving them vulnerable to the shorts.
Then there's technology, said Cramer, which also seems to be lacking protection from the shorts as of late. Tech stocks, he said, are now also squarely in the sights of the shorts, adding investors need to be careful there too.
A Bargain Play
"Sometimes the market gets it wrong," Cramer told viewers, as he once again recommended
, a stock that got crushed by 18% after it reported "disappointing" quarterly results.
Cramer said the markets are giving us a bargain in Owens Corning, with the stock now down 29% from its highs. Cramer's last recommendation of Owens Corning on Nov. 19, 2009 netted a 23% gain before he advised selling it on May 20.
Cramer said Owens Corning missed estimates by three cents a share when it last reported, sending the stock plunging. But, he noted, all of the company's businesses are performing well, and that will translate into higher profits going forward.
Composite materials make up 35% of Owens' business, said Cramer, and that segment is growing at 25%, with revenue up 26% from year ago levels. He said composites, which are used in everything from autos to wind turbine blades, are not dependent on the U.S., with 65% of sales coming from overseas.
Insulation and roofing makes up another big chunk of Owens' business, and that segment is growing at 16% year over year, said Cramer. While this segment did lose money in the most recent quarter, Cramer said the cost issues should be resolved in the next three to four months.
Trading at just 9.8 times earnings, Cramer said Owens Corning is a steal given that it's expected to grow at 30% in 2011. He said the company's growth, coupled with its 9% stock buyback program, makes the stock with the Pink Panther mascot a very compelling offer.
Best of Breed
"It's always worth paying up for the best of breed," Cramer told viewers, as he pitted the high-end grocery chain
( WFMI) against the more modest
Cramer said while both companies reported inline earnings this quarter, Whole Foods is clearly the best of breed winner. He said Safeway is merely an ordinary grocer, offering nothing proprietary, and therefore must compete solely on value. Whole Foods, however, is what Cramer described as an aspirational brand, with customers willing to pay more for better foods they feels are better for them.
Safeway posted a sales increase of just 0.6% in the quarter and lowered full year guidance, while Whole Foods saw a 52% increase in earnings per share and raised its guidance. Cramer said while Whole Foods may not have met some of Wall Street's expectations, it has solid revenue growth of 10% to 13% and same-store sales growth of 8.8%.
Looking at competition, Cramer said Safeway sees increased competition from companies like
, while Whole Foods really only competes with the privately held
When comparing these companies, said Cramer, investors must always factor in the growth rate. He said while Safeway trades at 12 times earnings, it has only a 9% growth rate. While Whole Foods, trading at 22 times earnings, has an 18% growth rate. Comparing apples to apples, Cramer said Safeway trades at 1.3 times its growth, while Whole Foods trades at just 1.2 times growth.
Cramer followed up on
, a small semiconductor equipment maker that stumped him in an earlier Lightning Round. He said while Nanometrics is a legitimate company that's taking market share, the company is simply too small to recommend.
Cramer told a viewer that
is OK, but that he prefers
Cramer told another viewer that everything is A-OK at
, a stock which he owns for his charitable trust,
Action Alerts PLUS.
Cramer told another viewer that things are definitely not OK at the biotech firm
, and he's a seller of that name.
Cramer was bullish on
Las Vegas Sands
Hudson City Bancorp
Bank of America
He was bearish on
-- Written by Scott Rutt in Washington D.C.
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At the time of publication, Cramer was long Apple.
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