RealMoney Radio Recap: Fake Out

"The same stocks that were up so beautifully at the end Tuesday are down so hideously today," Jim Cramer said on his "RealMoney" radio show Wednesday.

This is going to be a down week, he said, but yesterday's fake-out rally sucked a lot of people in. While some people want to get into stocks as they go up, Cramer said he recommends getting out when stocks go up and getting in when they go down.

Cramer said he advocates selling strength and buying weakness. People need to stay diversified, play defensive, buy consumer stocks and not be aggressive, he said.

In this market, which is difficult to fathom, Cramer said to buy Pepsi ( PEP), Eli Lilly ( LLY) and maybe Altria ( MO), which he owns for his charitable trust, Action Alerts PLUS.

In addition, he suggested soup, cereal and soap stocks for people who want to protect themselves. If you are able to take the pain, hold on to the basic companies that people can't ignore, he said.

"Know your time frame and your pain tolerance and work around it," he advised.

Vice Is Nice

The casino stocks are kind of like the tobacco stocks, Cramer told one of his callers. They're both vices that people can't stay away from, he said.

Cramer said he can't be against someone who wants to ring the register on Las Vegas Sands ( LVS) since it is up so high, but even if it came down three or four points he said he would be tempted to pick some up, not throw some away.

Cramer told a caller to wait until RadioShack ( RSH) goes to $15 to buy half, and then buy the other half when the company announces what he expects will be a pretty bad quarter, he said. RadioShack was recently at $16.75.

When a listener inquired about Crystallex ( KRY), which has a giant gold mine in Venezuela, Cramer said to hold it for now, then buy more when it goes down to $2.50 and ring the register at $4.50 to $5.

Although MasterCard ( MA)is under a lot of pressure and has been hurt today, Cramer said he is not giving up on it. Deutsche Bank has issued negative reports on MasterCard, but he said he is not backing away from it.

When a caller asked about Quest Diagnostics ( DGX) Cramer said it is a keeper here in this economy, and he told a separate caller who inquired about H&E Equipment Services ( HEES), that he likes the company, and with the probability of three up and three down, it might not be the time to pull the trigger on this stock yet.

Hershey ( HSY), like soaps, soups and cereals, is one of the few companies that will do well in the current economic slowdown, he said. It is a consumer staple that people will continue to buy and use whether the economy is good or not, he said.

Cramer told a caller that Automatic Data Processing ( ADP) should be making more money and suggested swapping out of it and getting into Hershey, Quest Diagnostics or Altria, which he owns for his charitable trust, Action Alerts PLUS.

He also suggested holding on to Schering-Plough ( SGP), which he owns for his charitable trust, Action Alerts PLUS, with a long-term perspective, since the company is in the midst of a turnaround and could make a lot of money on the upside.

Bristol-Myers ( BMY), which he also owns for his charitable trust, Action Alerts PLUS, is another drug manufacturer which he believes has a limited downside, he said.

Cramer told a caller to swap out of insurer American International Group ( AIG), even though it is at its 52-week low, and suggested MetLife ( MET), Prudential ( PRU) or Allstate ( ALL)instead.

"Allstate got smart and stopped writing aggressive insurance in areas that are hurricane prone," he said.

He warned a listener to be careful with Carpenter Technology ( CRS), as it's been going down for no reason and suggested taking a little off the table.

Bullish on BOOM

"One of the biggest joys in the stock market is finding a small fish that will become a big one," Cramer said.One of these small fish, he said, is Dynamic Materials ( BOOM).

This is a small-cap company that is engaged in the manufacture of metal cladding, which toughens weak metal, he said.

"A lot of people felt that BOOM was a cyclical stock," he said.

However, he said while looking at the refinery business, he sees that there are not enough refineries around, and as people start building more refineries, they are going to need BOOM.

Although there are only two analysts covering this stock, and a lot of people are betting against it, Cramer believes it is a long-term positive story.

"It is one of those stocks that you can buy and put away," he said. "I like the company and I like its business."

The financial world is filled with indices, Cramer said. There is the Dow, which follows the 30 largest public companies, the Nasdaq, which follows tech stocks and then there are exchange-traded funds or ETFs, which follow the energy and aerospace sectors.

On Wednesday, Claymore Group announced it is launching an ETF with little or no coverage, and it is also trying to launch an ETF with insider buying.

Cramer said this is ridiculous and is indexing for the sake of indexing.

All these ETFs do is confuse people he said, adding that the best reason to be in a mutual fund is to cushion you against a decline and diversify yourself.

With that he suggested going into Vanguard's mutual funds, which have the lowest cost fees and are very good at buying stock, he said.


Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by clicking here.

At the time of publication, Cramer was long Altria, Bristol-Myers and Schering-Plough.

Jim 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. 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." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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