Skip to main content

Why do brokerage firms hold meetings at strip clubs, and how can this make you money? Jim Cramer asked

"RealMoney" radio show listeners on Thursday.

Cramer said there are two kinds of firms: those that are value-added and attempt to make you money with huge research departments that employ analysts who rate stocks, and those that are just a trading desk.

"It's difficult for those firms to develop client relationships without doing something special," he said. And the firms with no research often take clients to strip clubs.

That's where Cramer said adult entertainment operator

Rick's Cabaret International

(RICK) - Get RCI Hospitality Holdings, Inc. Report

comes into play -- a company that owns "stores" in Houston, Austin and San Antonio, Texas, and Minneapolis, as well as adult Web sites.

Equities Magazine

said the stock is its pick for the best performer in 2006, he said, and Cramer also believes that the stock could do well.

Your decision to buy or not buy Rick's depends on your point of view, he said. Powerful Wall Street firms will try to outlaw places like this because they won't want smaller firms to have the unfair advantage of taking clients to a Rick's.

But if you think the forces of "nighttime glamour" will win out, Rick's is for you, Cramer said.

CD sales are down and download purchases are up, in part because of increased MP3 player sales, Cramer said. So if you want to make money off this trend, it's time to start looking at music company stocks, including

Warner Music

( WMG).

Image placeholder title
Scroll to Continue

TheStreet Recommends

He said that he was skeptical of the stock when it was spun off from

Time Warner


because it looked like the music business was fading away. "No one thought there would be such a rush to buy music off the Internet."

But now that the trend has caught on, he also said it's time to sell

Trans World Entertainment

(TWMC) - Get Trans World Entertainment Corporation Report

, which owns music retailers such as Strawberries. "This stock is not cheap ... because its earnings are falling apart."

Best Buy

(BBY) - Get Best Buy Co., Inc. Report

is an exception, he said, because even though CD sales comprise 20% of the company's business, it is making a transition to big-screen TV sales.

If you look at the price tag on a car made by

General Motors

(GM) - Get General Motors Company Report

, $1,500 of the price goes to paying legacy costs, Cramer said, referring to the health costs of all GM employees, current and past.

"It's part of a bigger issue killing GM," he said, which is reflected in the two biggest pieces of news to come out of the company this week.

GM has agreed to buy out workers in a "monster deal" because the amount they will pay to get these people off their books is "gigantic."

The goal is to reduce the workforce because the company's reduced market share no longer necessitates so many employees, Cramer said.

The company also said it is selling its most profitable mortgage finance business, Ditech.

There are two concepts at work here, Cramer said. The company needs to make money by slimming down, and it needs to raise money because it is a giant borrower and its credit rating is bad.

The only people who will make money off of these announcements are GM bondholders, because the company is in trouble, he said, "and I don't know if they can pull out."

Cramer said that the common stock should be appreciably lower because management's many mistakes are coming back to roost, but that the market does not yet fully understand the implications of these recent moves.

That's why he told listeners to stay away from GM stock and to sell shares.

Cramer believes that video games are such an entertainment phenomenon that they have replaced movies and books as the favorite pastime of America's youth.

His favorite play is

Electronic Arts

( ERTS) because it makes great games.

The stock is down to $52 from $54, which it hit after releasing its game

The Godfather

. Cramer said he would pick up some Electronic Arts at this level.


(DELL) - Get Dell Technologies Inc Class C Report

decision to purchase Alienware, a high-end PC maker whose machines are a favorite of game players, is more evidence that there's growth in video games.

While you can buy a Dell for around $1,000, serious game players shell out as much as $4,000 to $10,000 for high-end computers designed for video games.

These high-end computers are also "jammed with semiconductors," he said, including those made by


(RMBS) - Get Rambus Inc. Report



(GME) - Get GameStop Corp. Class A Report

was his final play on the trend, a stock that he said he used to own for his charitable trust

Action Alerts PLUS, and that he regrets selling.

Cramer on Demand

This week's "Cramer on Demand" stock was

JDS Uniphase


, a stock that he now calls "Just Don't Sell Us." (Weigh in on what stock Cramer should discuss next week by taking our poll at the end of this story.)

The company makes test equipment that ensures that the fiber-optic lines running to your home are in working order. It's a good business now because


(VZ) - Get Verizon Communications Inc. Report



(T) - Get AT&T Inc. Report

are fighting for survival.

Now that fewer and fewer people use landlines, these companies have come up with video on demand to keep customers, offering the ability to rent movies over phone lines.

But the copper lines now in place can't handle video, and that means there's a huge fiber-optic rollout underway. And that means that JDS Uniphase will do brisk business testing all the new lines, Cramer said.

Other companies that will also make money include


(FNSR) - Get Finisar Corporation Report

, whose chips bring signals to your home,


( AVNX), which makes controllers, and


(CIEN) - Get Ciena Corporation Report

, a general contractor.

But Cramer said that JDS Uniphase is his favorite because he believes in the management team.

Cramer told a caller that he likes

Martek Biosciences

( MATK), which has a "tremendous number of patents" for the micro algae used in infant formula.

He believes that the product could be used in a lot of foods and that even though the stock is down that it's a "screaming buy." He said that it's consolidating and will move higher.

Cramer said that


(LEA) - Get Lear Corporation Report

is stock to stay away from, even though it's near $17 and has a 6% yield.

"It's in the same place where


( DCNAQ) was at $18 before going bankrupt," he said. The company is too levered to the floundering auto industry, Cramer said, and the dividend can be cut.

It's just two points from its 52-week low, but Cramer said it's still time to sell.

The only auto-related stocks he could recommend were

Johnson Controls

(JCI) - Get Johnson Controls International plc Report

, which also makes air conditioning and energy management products, and


(HON) - Get Honeywell International Inc. Report

, which is primarily tied in with aerospace.

The only automaker he likes is


(TM) - Get Toyota Motor Corp. Report


Cramer told another caller that he likes


(NFLX) - Get Netflix, Inc. Report

, but that

Movie Gallery

( MOVI) and


( BBI) are on their last legs.

James J. Cramer is a director and co-founder of He contributes daily market commentary for's sites and serves as an adviser to the company's CEO. Outside contributing columnists for and, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by

clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click

here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click

here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click

here to get his second book, "You Got Screwed!" and click

here to order Cramer's autobiography, "Confessions of a Street Addict."