'RealMoney' Radio Recap: Cell Phonic Convergence

People want their phones to play games, snap photos, surf the Net -- and perhaps make a call, says Cramer.
Author:
Publish date:

A cell phone is so much more, Jim Cramer told

"RealMoney" radio show listeners Tuesday, and this trend is going to be a huge moneymaker.

Cramer said now that consumers want to play games, connect to the Internet, take pictures and send movies and images all on their phones, companies are scrambling to meet the demand for these services.

Cell-phone users say they want global positioning, and it's coming soon, he added.

Phone calls are a "secondary reason to buy a new phone. ... Far more important are those ancillary activities that people can't get enough of," he said.

That's what "convergence," is all about; and convergence is the theme that Cramer believes can make you money.

In phone makers, he said to look at

Motorola

(MOT)

because it "probably has the most forward phones right now" and "the models people want."

He said he likes

Marvell Tech

(MRVL) - Get Report

because the company makes controllers that send signals to the Internet, as well as

National Semiconductor

(NSM)

.

He said to look into

Palm

(PALM)

, which he believes is at the forefront of convergence. Its Treo acts like a PC, but it's really just a phone, he said. And Palm is dirt cheap vs. its growth rate.

Even though

Microsoft

(MSFT) - Get Report

disappointed Wall Street by delaying the debut of its Vista operating system, the company announced that it won a contract to install software on 500,000 cell phones.

Image placeholder title

The Census Bureau will use these phones for the 2010 U.S. Census, and census takers will be able to access the Internet and run Windows.

Cramer said that he hated

Level 3 Communications

(LVLT)

as it fell 50 points, but now that it's down he believes that it's set to rally.

"I have now seen that we are without a doubt going to have a major renaissance in technology and in telecom," Cramer said. "And

Level 3 is at the heart of that."

Cramer said that the company enables long-distance and local telecom companies to offer high-speed Internet services.

So even though the company doesn't have a great balance sheet, he's confident the stock will go higher.

Antidebt, Antimargin

A student named David joined Cramer to talk about the stock market simulation that his class is participating in. Student teams were given a hypothetical $100,000 with the ability to buy $100,000 on margin.

They have to buy 25 shares or more and can only buy stocks priced at $5 and higher.

Cramer was excited about the simulation because it is similar to one that he made employees at his old hedge fund participate in before they were given real money.

"Go the mythical way. Then you can put some real money to work," Cramer said.

However, he discouraged listeners from buying stocks on margin, meaning borrowing money to buy stocks. "We borrow money to buy a house, not to buy pieces of paper," he said. "We are antidebt and antimargin."

That said, he encouraged David to buy the stocks that he knows. For example, Cramer said that he would think about buying retail stocks because he is very familiar with the companies.

David said that buying what they know is what led many students to buy

Apple

(AAPL) - Get Report

and

Cisco

(CSCO) - Get Report

.

David was less sure about the story behind

CBOT Holdings

(BOT)

, so he was unable to explain why the stock has moved up or down.

However, he was confident about his decision to buy

Gilead Sciences

(GILD) - Get Report

for its work with AIDS treatments.

If you can't say why you own a stock you will be shaken out, Cramer said.

"Lever." Cramer said it's another Wall Street term designed to confuse the new investor, but that it's an important one to know if you want to make money. The lever is the factor that determines whether a stock goes up or down -- the levered point.

For example,

Las Vegas Sands

(LVS) - Get Report

is levered to its overseas business in Macau, where gamblers are a little greener and often lose to the house.

But a different casino might be levered to the amount of interest it makes on loaning money to customers.

Cramer said that

The New York Times

(NYT) - Get Report

is levered to the health of its classifieds section but its rival

Tribune

(TRB)

is not levered to the day-to-day performance of its publications.

Instead, he said that Tribune is levered to the Chicago Cubs.

One might think that the construction boom might influence

Caterpillar

(CAT) - Get Report

, but right not the price of oil is the main lever, Cramer said.

This is because Caterpillar is the only company that makes the trucks necessary to move heavy shale boulders so companies can get more oil out of the ground.

Cramer said he likes that because Caterpillar, as the only game in town, will have more control over what it charges for these trucks.

Drug stocks are not levered to the drugs that are on the market, but to those in the pipeline. The future is about the drugs that haven't been approved yet, but are in the phase II and phase III stages.

Drug stocks with nothing in the pipeline do nothing, Cramer said, which is why

Merck

(MRK) - Get Report

and

Pfizer

(PFE) - Get Report

are doing nothing.

Cramer bookended the show with more news from the mobile phone revolution. He said that online social networks MySpace and Facebook are soon to hit cell phones.

Users will be able to search for members in the same zip code or within a certain radius, as well as send text messages and pictures.

He believes that

News Corp

(NWS.A)

, which owns MySpace, will soon be more levered to this online network and its related advertising markets than to advertising in newspapers and on television.

At the time of publication, Cramer was long Microsoft.

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

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."