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NEW YORK (TheStreet) -- If this market was in grade school it would get an "F" for not paying attention, Jim Cramer said on Mad Money Monday as he opined on the idiocy of a market that is incorrectly valuing stocks every day.
Cramer noted once again that Boeing(BA) - Get Report, a stock he owns for his charitable trust, Action Alerts PLUS, is among the worst in the Dow Jones Industrial Average for the year. Yet, right on cue, the company's CEO announced at the Farnborough International Airshow today that things are great at Boeing and the company's only problem is meeting demand.
Then there's URS Corp (URS) , a stock that's apparently not worth anything to the analysts who cover it but today was worth a full 12% more after the company received a tender offer.
The trend continues with Citigroup(C) - Get Report, said Cramer, a stock that's perpetually hated, and with Facebook(FB) - Get Report, another Action Alerts PLUS holding that seems to be up and down big every week on no news at all.
Cramer said every one of these examples could've been easily spotted by individual investors with a little homework, which is why he always advocates picking your own stocks and not simply investing in an index fund.
An Exciting Development
Not everything in the market has become unpredictable, Cramer told viewers. There's one tried and true way to make money and that's with corporate breakups. That's why the news that Relational Investors, an activist firm, has taken an 8.5% stake in Manitowoc(MTW) - Get Report is so exciting.
Cramer explained that Manitowoc is a well-run, 100-year-old company that got its start in shipbuilding and ice-packing, and now has evolved into a powerhouse that makes cranes and food service equipment. Manitowoc makes everything from tower cranes to boom trucks, Cramer noted, and that side of the business accounts for 60% of sales. Its food service business, the other 40%, makes ice machines and other equipment for restaurants.
The problem is that cranes are cyclical, relying on a strong economy, while food service is secular and remains pretty steady. That means if you're an analyst on Wall Street, Manitowoc is confusing. You're not going to recommend it as a pure construction play, nor as a restaurant play.
Cramer said valuing Manitowoc's crane business at nine times earnings gives it a value of $3.5 billion. The food service business fetches 12 times earnings and would fetch $4.25 billion.
That's a 42% premium over current valuations, Cramer concluded. With activist investors in the mix, management just might listen and unlock that value.
When a company misses earnings by a mile, how can you tell whether the CEO's excuse is legitimate or ridiculous? Cramer introduced his "Mad Money Credibility Scale" to analyze four recent retail implosions.
First up, The Container Store(TCS) - Get Report, which explained its poor results on a "retail funk" that's affecting all retailers. Cramer said on a scale of 1 to 10, he gives this excuse a 3 for believability.
Next up was Tractor Supply(TSCO) - Get Report, which once again blamed the weather for its second miss in a row. Cramer said this excuse gets an 8 on the scale because management confirmed that as the weather improved in the second half of the quarter so did sales.
Third was Lumber Liquidators(LL) - Get Report, whose drastic pre-announcement sent shares plunging 25%. The company blamed a weak macro economy and poor remodeling trends for its staggering losses. Cramer said this excuse receives a 2 on his scale.
Finally, there was Family Dollar (FDO) , which reported its third miss in a row. The company said that its low-income shoppers were still getting squeezed by high unemployment and reduced government benefits. Cramer said this excuse scores a 1 on his scale as it's clear those shoppers are just spending elsewhere.
Following Nelson Peltz
Never, ever piggyback your investments off of what an activist or celebrity investor is doing, Cramer reminded viewers. Unless of course, that investor is Nelson Peltz.
Cramer said he never advocates trying to follow what big-time investors are doing because by the time their holdings are made public it's old news. Those same investors are under no obligation to update you on their intentions.
But Cramer said Nelson Peltz has a stellar track record, which makes his interest in Bank of New York Mellon(BK) - Get Report so intriguing. Following Peltz netted big gains when he took positions in State Street(STT) - Get Report and Legg Mason(LM) - Get Report, Cramer noted, as well as when he got involved with Mondelez(MDLZ) - Get Report and Pepsico(PEP) - Get Report.
Cramer said Peltz will be speaking this Wednesday at the Delivering Alpha conference and will likely give more details on his interest in Bank of New York. Cramer thinks investors should get in ahead of those details.
No Huddle Offense
Cramer said he's been a fan of Whiting for quite some time, especially since the Bakken shale has now surpassed Alaska in oil production. He said Whiting was a likely takeover target, making the Kodiak deal perhaps a poison pill to help it stay independent.
But even as a combined company, Cramer said a takeover of Whiting could still be possible. Given the company's stellar growth and earnings, shares could surge still higher.
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-- Written by Scott Rutt in Washington, D.C.
To email Scott about this article, click here: Scott Rutt
At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, BA and FB.