Click here for an archive of Cramer's "Mad Money" recaps.
Jim Cramer told "Mad Money" viewers on Thursday that he was going to commit stock market heresy -- and recommend buying bank stocks at this part of the business cycle.
The business cycle dictates which stocks will work. Where you are in that cycle should determine what sectors you buy into, Cramer said, adding that when people go against the cycle, they lose big.
At this point in the cycle, after 17 straight rate hikes, banks should be train wrecks and ugly untouchable businesses, he said. However, this is not the case. In fact, Cramer believes banks are going to go up, therefore, he broke the rules and told viewers they should want to buy a bank.
"But what if banks are on the verge of blowing up, and Cramer's being premature?" he said.
That's how you should be thinking when someone challenges an orthodox rule. After all, it's orthodox because it works, he said. However, he really believes bank are on their way up.
"Why are banks in a good place, when history and discipline says that they should be in a bad place right now?" he asked. "What makes me so confident?"
Reason No. 1 is that banks have stopped issuing stock and are beginning to buy back stock.
Secondly, whereas banks used to have pretty bad credit card losses when people declared bankruptcy, now with the new bankruptcy law, it is tough to declare it, Cramer said. In addition, you are still liable for your debt, even if you do declare bankruptcy.
The third reason he gave was that banks are cheap.
Cramer's final reason was that after 17 rate increases, when banks should be experiencing loan losses and mortgage problems, they actually have the fewest loan losses and mortgage problems they've had in years. Banks have created a slew of businesses that are fee-based by relying less on interest rates and more on fee-based business, he said.
Banks need to be bought, Cramer emphasized. They have great dividends and are holding up a lot better than other stocks. They should move up 15% to 20% over the next 12 to 18 months, he predicted.
"This time things are different for banks," Cramer said. "This time they have weathered the rate hikes and come out with barely a blemish." Buy banks while they are still cheap, he said.
Want a Tip? Do Your Homework
If you're trying to make money, you have to follow the rules, Cramer told his viewers. Don't buy on tips, buy after doing your homework.
Making money can be easy, but
not losing money
can be difficult, he said.
Using an example of a tip he received, Cramer tried to teach his viewers how not to lose money.
Recently he received a tip via email from a frequent viewer and mailer who is a doctor with diabetes. The doctor, who has been following
( AMLN) diabetes drug Byetta, said that people who were on Byetta were losing weight without even trying to. He said this was a secret that only the medical community knows about.
This information would make many people want to buy Amylin, especially coming from a doctor that is diabetic, Cramer said. But while the natural instinct is to like these types of stock tips, since they are attractive, our instincts are usually wrong, and we need to fight them if we're going to make money, he said.
People should use tips to do further homework before buying, Although Amylin has worked for him in the past, Cramer said wasn't a buyer of the stock because he hadn't done his homework on it.
Looking at research on the stock, Cramer found that it was not, in fact, a big secret that Byetta creates weight loss, as the doctor had claimed. In fact, it is a well-known fact. It is mentioned in the first line of a Goldman Sachs research report that Cramer read.
Amylin's easy money is gone, and its momentum is about to hit the wall, he said.
Looking at a Morgan Stanley research report, Cramer found Byetta has been facing a cartridge supply restraint. Although this is a high-quality problem caused by too much demand, it is a problem, nevertheless, he said
In addition, Novartis and Merck are coming out with competing drugs. More research showed Cramer that data has not been strong, and there has been a decrease in sales and the number of first-time users of the drug
Amylin reports earnings on Monday. If people want to buy this stock, Cramer recommended waiting until it reports on Monday.
VF Shoots Down Downgrade
Last Tuesday morning, Todd Slater, a research analyst at
, came out with a four-bullet-point note on
and downgraded it from a buy to a hold citing softening consumer trends, Cramer said.
Slater said it wasn't a negative call, even though it was a downgrade.
The report came out right before VF reported earnings. When an analyst comes out and downgrades a company a day before the company is to report earnings, people assume he must know something they don't, and he's not including it in the report, Cramer said. Because no reasonable person makes a call like that unless he knows it's right, otherwise it's too embarrassing, right? Cramer asked.
In addition, Slater gave macro information and talked about 'general' consumer habits when making his call on VF.
"If you read this research report, you might have assumed that he had some insider info and this macro issue was just an excuse to downgrade," Cramer said.
VF was up 22% when Slater's report came out, and the next day it beat estimates and traded higher all day. Slater got it wrong big time, he said.
VF came out the next morning with guns blazing. It raised guidance and talked about better growth in the second half.
The lesson to learn here is that analysts don't have insider information. Sometimes they don't even know what they're talking about, Cramer said. If they're making a macro thesis without discussing anything specific, that's lazy, he added.
VF is a great company and not a stock you want to bet against if you don't have a specific reason, he said.
Straight From the Top
Welcoming Eric Wiseman COO and President of VF onto the show, Cramer asked him how, if the low-end consumer is allegedly slowing, the company was able to blow out the numbers.
"We have a great story," Wiseman responded. "We're getting growth because we have great brands, and we know how they connect with consumers."
Further, he said the company is able to execute their business very well and that results in consistent growth. "One of our greatest strengths is that we have number of brands," Wiseman said, adding that 25% of their business is done outside of the U.S. "We have a broad footprint which allows us to manage some risk."
Wiseman added that the company is very aggressively going after acquisitions, but they are being patient and are confident they are going to find acquisitions that are right for their portfolio and their shareholders.
Cramer advised viewers to stay bullish on VF and called it one well-run business.
To view Jim Cramer's interview with Eric Wiseman, click here.
Cramer welcomed his second guest, regular viewer Sen. Kit Bond, a Republican from Missouri, to the show and asked him how he's able to do the homework to invest wisely and be a senator at the same time. He asked the senator how he profits from the show.
Bond said that he listens to what Cramer recommends and then waits a couple of days to look at it. He also said he reads
Investor's Business Daily
and called it one of the research tools he uses when making investment decisions.
When you make your investment decisions do you ever think what would happen if the Democrats took over Congress in November, with the drug and defense stocks being hot right now? Cramer asked.
"The economy may not look so well," the senator replied. "The job growth and the increase in the stock market has gotten a boost from 15% dividend and capital gains rates."
Bond said he usually watches the 9 p.m. EDT "Mad Money," when he's "done enough damage for the day" and it helps him get his mind off of lawmaking.
Cramer was bullish on
Procter & Gamble
Cramer was bearish on
( SMDI) and
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 latest book by
At the time of publication, Cramer was long Altria.
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."
None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.