RealMoney Radio Recap: GM's U-Turn

Cramer says this stock has bottomed as the company begins to fix itself.
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Thursday is "Cramer on Demand" day, Jim Cramer told his

"RealMoney" radio show listeners, and the stock that they wanted him to opine on this week was

General Motors

(GM) - Get Report

.

He said that he has hated the stock for a long time, but he believes the stock has bottomed because the automaker has done many things to rectify its situation.

It sold off a large portion of its finance arm, but can still participate in the upside of that unit, he said. And it is making better cars.

More importantly, he said, there have been some significant management changes. GM got rid of some financial people who "really didn't do them any favors," he said. And the company brought turnaround veteran Jerome York on board as a director.

Cramer said that York has found money wherever he has gone, turning around giants like

IBM

(IBM) - Get Report

and

DaimlerChrysler

(DCX)

.

Even though he has said in the past the GM shares could be at $40 this time next year, he does not believe that the stock will go up in a straight line. He said that he just sees a lot more upside than downside.

(Weigh in on what stock Cramer should discuss next week by taking our poll at the end of this story.)

"Given the stormy seas of the market, big news is coming out of retail," Cramer said, referring to the fact that

Burger King

(BKC)

went public.

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You can own a piece of the Whopper, but he said that he'd pass on this stock. Even though he believes it's a better place to eat than other fast food restaurants, he said he is concerned about the fact that the sellers of the stock are the insiders.

The initial public offering was priced at $17. It went up to $18, then right back down. But he likes to see a company sell stock itself and then put that money to work; in this case, he said, the owners are taking money out, and he would, too.

Cramer said that he has received a lot of hate mail and criticism because he had recommended

Goldman Sachs

(GS) - Get Report

at $167 only to see it fall to $147.

But he reminded listeners that he has been consistently recommending the stock since it was at $90, and that is because he believed even then that the stock would move higher.

He's not trying to hammer the little guy, he said. He believes that Goldman will go to $225, but just not in a straight line.

You need to learn patience, he said, adding that when we buy stocks, they rarely go straight up. He said that the way to profit is to sell a little when stocks run higher and then to buy when they come down.

Under Review

"Just a week ago, things were going great, and I thought the market was going higher," Cramer said.

He said that this was a bad call short term, evidenced by the fact that the market saw its biggest drop in three years yesterday and that the

Nasdaq

is down for the longest streak in its history.

"How did this happen? We need to know how this happened so we can profit from it ... so we can understand how the market works," said Cramer.

He said that listeners should go back to last Wednesday, when the

Federal Reserve

raised the short-term interest rate to 5%. The Fed, which is the nation's central bank, controls the rate of return that people get for holding cash in the bank.

Bankers at the Fed raised rates because they know that if the economy grows too fast, it creates inflation. That's the enemy of your purchasing power, Cramer said, adding that the Fed is trying to preserve the value of our paychecks.

But investors were not as worried about the ravages of inflation because they were looking at upside in light of soaring commodities prices. It emboldened people, Cramer said, because it showed that the economy was strong.

Then yesterday the consumer price index, which measures what consumers pay for goods, showed a marked rise in prices beyond what Wall Street economists thought would happen, he said.

We saw inflation and the market crashed, he said, leading many to believe that it is a good idea to stay away from stocks.

Now that the "feverishly high prices of commodities have come down," inflation worries should ease, said Cramer.

But investors bailed and stocks sank with shocking speed, and he said that's an opportunity to get in. "Think of it as a one-day sale at the mall," said Cramer. There was too much inventory because people were all trying to unload stock at once.

He added that listeners who have done their homework have found stocks that fell even though the company is strong. It's now that he recommends deciding how much stock you want.

But when you buy, he warned, buy incrementally. He reiterated that investors must respect "the humbling nature of the market ... and how quickly you can lose money."

He said that he believes the market is putting in a bottom, and that even though it's dangerous to touch natural gas and commodities plays, other sectors can be bought in steps right now.

"You have to understand the fundamental rules of trading," he said. "Buy weak. When you get strength, you have to let some go."

Off Target

After a huge market slide, listeners had a lot of questions for Cramer.

The first caller wanted to know if he should be wary of

Target

(TGT) - Get Report

, which Cramer said has not been as good as he has expected it to be lately.

Cramer said that

Wal-Mart

(WMT) - Get Report

has moved a little upscale and is getting competitive, and that the company is losing a bit of its luster.

However, this is a management team that he said has historically "been able to figure things out." While this may not happen in the near term, he said that the stock could recover after it marks time. He suggested putting money to work in other sectors, or in a company like

Abercrombie & Fitch

(ANF) - Get Report

if the caller wanted to stay in retail.

Another caller said that he had bought

Goldcorp

(GG)

, but then saw the stock slid 27% as commodities got hammered.

Cramer said that gold has come down from huge highs and that all the gold stocks were crushed in the process, but that it's also important to note that Goldcorp didn't report a good quarter.

"It was a pure disappointment," said Cramer. "In many ways, GG let us down."

The company just finished buying some assets from

Placer Dome

, which trades in Toronto under the stock symbol PDG, so if gold goes up, Cramer believes the stock could go to $32 or $33 from its current level near $31.

Cramer likes

Schering-Plough

(SGP)

better than

Merck

(MRK) - Get Report

, in part because he believes that management is better at Schering. He owns Schering-Plough for his charitable trust

Action Alerts PLUS.

He said that the stock represents all the upside of Merck without the legal downside.

With natural gas prices diving, a caller wanted to know if this would benefit

Dow Chemical

(DOW) - Get Report

. Cramer said that plastics companies like Dow pay a gigantic natural gas bill every year, and that last year the company was paying $13 or $14 per million British thermal units for natural gas. Now that they're paying about $5 -- "that will explode their margins," he said. People will be shocked by the earnings from this deeply neglected company, he added.

He said that

Valero

(VLO) - Get Report

is stuck. The stock has been up so much that he said he would not buy anymore at this level. He suggested waiting for it to fall before buying more, but said he would not sell Valero because he still sees some upside.

A caller noted that

Seagate

(STX) - Get Report

managed to close up on a horrible day, and Cramer said that the company is in the sweet spot over the next year. However, the short-term picture isn't as rosy because its disk drives are installed into personal computers.

Cramer said that PC sales are in neutral because

Microsoft

(MSFT) - Get Report

is late with its new Vista system, so he would "be ginger" about buying Seagate, and would not buy a lot.

Cramer owns Microsoft for

Action Alerts PLUS.

Not only would Cramer steer clear of Merck, he cautioned on

Pfizer

(PFE) - Get Report

, too.

"Big pharma has very little momentum," he said.

He called

MetLife

(MET) - Get Report

a good company, but because it has seen a change at the top, he can neither recommend nor dismiss the stock.

He said that he really liked the previous chief executive, but that he doesn't know enough about the new CEO. He added that he likes

Prudential

(PRU) - Get Report

and

AllState

(ALL) - Get Report

.

He said that he has liked

Sears

(SHLD)

, which he owns for

Action Alerts PLUS, since the stock was at $40.

Now it's near $159, but he said that it's not done going up, due in large part to the fact that he believes CEO Eddie Lampert is a great manager.

At the time of publication, Cramer was long Microsoft, Schering-Plough and Sears.

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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