Cramer's 'Mad Money' Recap: Wild About Defense - TheStreet

Click here for an archive of Cramer's "Mad Money" recaps.

"The higher prices we had this morning were a gift so we wouldn't get beat up," Jim Cramer said on his "Mad Money" TV show Tuesday.

"I hope people sold the sectors that are totally untouchable -- the banks, homebuilders and most definitely the brokers."

The worst-case scenario keeps playing out, so sell what's not working, he said. This is a tough market, and what's making it tougher is the financials. The whole market is not in bull mode, but individual sectors are.

Therefore, once market players sell the bad, they should slowly redeploy their capital into the bull markets that are still working, such as aerospace, machinery, agriculture, minerals, infrastructure and oil and oil services, Cramer said.

In addition, Cramer said he has a brand new bull market people can get into as they sell the stocks that are not working. "After this quarter, defense has become the seventh bull market," Cramer said.

Defense stories have dominated the front pages of the newspapers as the American defense industry supplies the increasing demand in the Middle East market for arms, he said, citing a recent article in

The New York Times

.

And it doesn't stop with arms sales. The army, Cramer said, is saying that the U.S. is going to be spending a long time in Iraq.

"The future looks pretty bright for the defense industry," he said. "Our military spending is seven times that of China. We are a war machine, and while I don't want that, we should try to profit off of it."

"It is what it is," Cramer continued. "Defense is in, and financials are out."

Image placeholder title

Defense Rules

Defense stocks are "cheap" and should be bought here, Cramer told viewers. The defense spending cycle is continuing, and because the Democrats are afraid of looking weak on security, they should continue to spend on defense if they take over, as well, he said.

When seeking out a defense play, people should look for three things. First, they should look for valuation, Cramer said. "Cheaper is better."

The second thing people should want from their stock, as odd as it sounds, is that it is levered mostly to defense. A lot of these defense contractors are not strictly defense, he pointed out. For example,

Boeing

(BA) - Get Report

is the second-largest defense contractor in the country, but it is mostly involved in commercial aircraft.

Finally, people should look out for U.S. contractors, because they are the ones profiting from the military arms deals from the Middle East.

Keeping these three qualities in mind, Cramer named

Alliant Techsystems

(ATK)

as his second-favorite defense play. This company, he said, makes bullets, and 87% of its sales come from defense. Plus, it trades at 1.3 times its growth rate and is therefore cheap, he said.

As the military industry continues to spend, Alliant's numbers should come up, Cramer said. The company has an "amazing" buyback, so much so that "some would say it's taking itself private."

In fact, the decrease in Alliant's share count leads Cramer to believe there is an upside surprise coming soon.

However, if people are going to buy Alliant, they should be careful, Cramer warned. The company reports earnings Thursday. He said he would put half his position on before the quarter in case it runs after it reports.

B&G Foods'

(BGS) - Get Report

President and CEO David Wenner joined Cramer on his show and discussed his company's plans.

B&G tends to buy smaller brands that have been neglected but have great brand equity and margin structures, Wenner said. "We focus on them and are typically successful in turning them around."

When Cramer asked whether B&G is able to pass on the food inflation, Wenner said the company has done so this year and that it's a trend that's improving.

For those investors who are worried about being in a world where mortgages are causing pain, Cramer suggested taking a look at BGS.

During the "Sudden Death" round, Cramer was bullish on

Wal-Mart

(WMT) - Get Report

and bearish on

Global Payments

(GPN) - Get Report

.

Lightning Round

Cramer was bullish on

FactSet Research Systems

(FDS) - Get Report

,

Dynegy

(DYN)

,

Brocade Communications

(BRCD)

,

EMC

(IDEV) - Get Report

,

Cisco Systems

(CSCO) - Get Report

,

Indevus Pharmaceuticals

(IDEV) - Get Report

,

Costco

(COST) - Get Report

,

Acergy

( ACGY),

CF Industries

(CF) - Get Report

,

Mosaic

(MOS) - Get Report

,

Agrium

(AGU)

and

Potash

(POT)

.

Cramer was bearish on

First Solar

(FSLR) - Get Report

,

General Cable

(BGC)

,

Buffalo Wild Wings

(BWLD)

and

Alcatel-Lucent

(ALU)

.

For more of Cramer's insights during the Lightning Round, click here

.

Pop Quiz! Are you a loyal "Mad Money" viewer? Take TheStreet.com's new "Mad Money" culture quiz to see how much of the show you've caught this week or just to immerse yourself in Cramer's nonfinancial madness.

Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by

clicking here

.

At the time of publication, Cramer was long EMC.

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.