Jim Cramer told his
"RealMoney" radio show listeners Thursday that there are four bull markets in play right now: infrastructure, mining and minerals, energy and aerospace.
Deciding which stocks to buy is deeply colored by these four markets, Cramer said, noting that there have been specific bull markets in the past. For example, in the 1990s it was technology, and in the 1980s it was food, beverage and drug stocks.
Right now, the world is being driven by a few very important countries that are growing like mad, he said. He was referring to what he calls "BRIC," or Brazil, Russia, India and China. But he also noted that Argentina, Australia, Vietnam, South Korea and Switzerland are growing fast, and that this is driving the four current bull markets.
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These countries need to build out their infrastructure, including refineries, factories, skyscrapers and energy infrastructure, he said. "They need to build the modern-day world we take for granted in the U.S."
Mining and minerals comes into play because they are the building blocks needed to create an industrial society, and include things like copper, coal and iron.
As for energy, Cramer said "we're in a hydrocarbon economy," and that the energy complex now represents only 10% of the
, down from 20%. These stocks are always a buy, he said, particularly on a day when they fall and give investors an opportunity to buy them for less.
And as economies grow, the demand for efficient transportation increases, which is why he said that the aerospace sector is on fire. For example, the number of planes serving passengers in China is about the same size of
( DALRQ) fleet, he said. In a country of a billion people, it's inevitable that this will change, he said.
We care about finding bull markets because companies in these sectors are able to raise the price of their goods, he said. Drug, technology and food stocks no longer have this pricing power, he said. But
announced that it will raise the price of all its commercial aircraft by 4%.
He said that it's not too late to get in on these bull markets, given the fact that BRIC is in the beginning stages of industrialization. "Think about how long it took for the U.S. to become a great industrial power," he said, adding that these bull markets are going to be long-term stories.
Hansen, Hands Down
( HANS) is the hottest company in our stock market, bar none," Cramer said. But he told his first caller that now is not the time to buy.
The gigantic energy drink company's stock was $30 this time last year, and now it sells for $184. Plus, it's only down $17 from its 52-week high.
It hasn't come in enough, said Cramer, adding that he would wait for it to hit $160 or $170 before buying.
He told another caller that
could someday surpass
, but that the stock has been gripped by momentum and is currently falling prey to profit-taking.
Tata Motors has had a huge run higher, so he said that he would wait a day before buying. Plus, he said that it's important not to buy all at once, since you can never be sure that a stock has hit its bottom.
A caller wanted to know about
, a stock that Cramer until very recently owned for his charitable trust
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Cramer said that he sold his entire position in Altria because of Wednesday's "very discouraging analyst meeting." The chief executive talked about how he could not be rushed into splitting the company into three separate divisions, and Cramer had owned the stock in part because he was hoping that this split would come sooner than later.
Plus, the company pays out a 4.3% yield, which had seemed pretty good. But now that the
has raised the overnight lending rate to 5%, you can earn more by holding cash, which has is a fairly no-risk proposition.
He said that he would wait and buy it at lower price if he wants to get back into the stock, but that right now the big cyclical industrial companies are more exciting.
( LU) a challenged company that he had problems with when he owned it for
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He said that it has "shafted shareholders in two ways," by missing earnings repeatedly and by selling itself to
( ALA) for too little money.
is growing at 16%, but its P/E ratio is only 18, Cramer said. Since he would be willing to pay up to twice the earnings growth, he would buy it until the stock price rose to a level where the P/E ratio hit about 30. He said in the drugstores, CVS is good,
is speculative and that
is best of breed.
A caller wanted to know if
would be a good tech name to add to his portfolio.
Cramer said that this is not the right choice because the company is having a bit of a slowdown, even though it's a good play for fast-growing tech areas like wireless video game controllers. The company is also levered to personal computers, and he believes that the PC business is slowing.
He said that a better play is
, which he owns for
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"I love the smell of higher learning," Cramer said. And that's because sophisticated entities like universities and colleges are putting money into the hedge fund game.
For example, he said that the College of Wooster, a small liberal arts school in Ohio, has tripled its endowment from about $89 million in 1990. It's because the school got involved in hedge funds, he said.
According to Cramer, hedge funds "try to make money by any means necessary," regardless of the direction of the market. In a bull market, hedge fund managers own stocks; and in a bear market they'll bet against stocks, he said.
The term has no exact definition, even under federal and state securities laws, he noted. Plus, managers share in the profits that they make, rather than just taking a fee upfront.
Hedge funds are definitely something to take note of, Cramer said.
Each week listeners vote on what stock they want to hear about, and this week the "Cramer on Demand" stock was
Archer Daniels Midland
The stock has gone up 146% in the last year after doing nothing for about 20 years, he said, and that's thanks to the fact that ethanol is the alternative fuel of the moment.
"The company had been promulgating the notion that we should be using ethanol, a not-powerful, not-good source of additive to gasoline, for many years," he said. But the resistance to ethanol use has changed because oil prices went up enough to make it competitive, despite the fact that it doesn't burn as well as oil and that it corrodes pipelines.
It's not a great fuel, but the entities in favor of ethanol are in states that are very powerful in Congress, he said. For example, MBTE was added to gasoline to improve the fuel, but it pollutes ground water; and these politicians pushed to have ethanol replace MBTE.
The only company that makes ethanol on a large scale is Archer Daniels Midland, Cramer said, which is why the stock moves higher anytime you hear about more acceptance of ethanol.
Plus, he believes that the company's new chief executive, Patricia Woertz, will be adept at getting ethanol to gas stations, thanks to her experience working for
Cramer discussed the fact that many of the people who listen to him on the radio and watch his "Mad Money" television show are just starting out. He encouraged all of his listeners to email or call, and that no question is too basic.
Someone recently asked what type of homework Cramer does to decide on what level to buy or sell a stock.
Cramer said that he doesn't want to pay more than twice the growth rate of a company. This means that it's necessary to know a company's earnings growth rate, as well as its price-to-earnings, or P/E, ratio.
The P/E ratio divides the current stock price by the company's earnings-per-share price.
Cramer added that this information is available at websites like Yahoo! Finance and TheStreet.com, the site founded by him.
He said that in the case of
, the company is growing earnings at 8% a year. That means he would be willing to pay a stock price that was equal to a P/E ratio of 16 times earnings. Right now the stock sells at about 14 times earnings, so he believes it has room to move higher.
He also said that if the stock price were to go appreciably lower, sending the P/E ratio down, that would be an opportunity to buy more.
It's important to have an idea of how many shares in a company you want to own before you start buying, he said. And then the stock price movements can help determine how much of that position you buy or sell at any one time.
At the time of publication, Cramer was long Qualcomm.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, 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
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