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We are in the midst of an economic slowdown in the U.S., and during a slowdown, the playbook is easy, Jim Cramer told viewers of his "Mad Money" TV show Tuesday. Buy best-of-breed supermarket, drug and medical stocks, he said.

Branded names are not the same thing as best of breed, Cramer emphasized. He offered two examples of companies that sell branded products that are actually second-tier products.

When playing in an economic slowdown, people should not buy low-quality brands, such as Spectrum Brands ( SPC) and Prestige Brands ( PBH), and skip best-of-breed names, said Cramer. They will lose money.

"These two brands are the equivalents of gourmet tater tots," he said.

People want to get into these stocks because they look cheap and make what Procter & Gamble ( PG) makes.

But if market players want to become defensive and make money during a slowdown, they must be able to differentiate between real brands and faux Wall Street brands, Cramer said.

Spectrum and Prestige are brands that are created by private equity guys that are out to make money at anyone's expense, he said. Only you really care about your money, said Cramer, adding that he wants to help people sort out the real gold from the fool's gold.

Cramer believes that Spectrum, his first example, is not a good company because "it is a virtual mosaic built around the husk of batteries."

Since March 2005, the stock has dropped 85.9%. In mixing lawn-care products, fish and aquatic supplies, grooming services and batteries together, the company thought it would create brand loyalty that would make it money.

Not only do these products not belong together, but also, the brands that Spectrum offers, such as Rayovac batteries and Remington razors, are not best-of-breed names.

Gillette has brand loyalty. In fact, when Cramer thinks of razors, several brands come to mind before Remington.

The central idea that drives the company -- brand loyalty toward the products -- was a false concept, Cramer said.

In addition, raw costs to make these products must be killing Spectrum, he said. There is a zinc shortage right now, and Spectrum uses zinc in its batteries. But the biggest red flag of all is that the company is sitting on a mountain of debt.

"With Spectrum, you're getting a company that makes second-tier products, has debt and pays a lot in raw costs," he said, whereas Procter & Gamble has cheaper raw costs and actual brands.

Stick with best of breed, and you'll make some mad money, Cramer advised.

Faux Pas

Prestige is another example of what not to buy, he said.

"I'm not picking on these stocks because I don't like them," Cramer told viewers. "And I'm not just telling you to sell them. I'm trying to teach you how to spot faux brands."

People can make money with consumer products, he said, if investors buy best of breed.

Prestige is a branded-products company that peaked more than a year ago. It has only second- or third-tier products, but that isn't even the real issue, Cramer said.

The real issue is its competitor Johnson & Johnson ( JNJ).

Johnson & Johnson has a category killer in every area that Prestige has its hand in, Cramer said, adding that JNJ is totally the best of breed in consumer products.

And what Prestige's products have is price loyalty, Cramer said. Consumers buy its products as long as their prices are low.

Prestige's "motto is based on brand loyalty that they don't have," he said. "Prestige is not defensive, but a mimic-defense stock."

Another red flag on this company is that its CEO recently left. The company said it was strictly a personnel decision made by the board, but when high-level people leave companies, Cramer said, it always raises eyebrows.

"The bottom line is that Prestige has only one proprietary product and that is hype," Cramer said. Understand hype, and buy best-of-breed companies like Johnson & Johnson, Cramer said.

Ahead of the News

Doing your homework is important, Cramer emphasized. Otherwise, he said you could get crushed by people in the market who know something you don't.

The New York Times recently published an article in which it reported that the government could cut 20% to 30% of Medicare payments.

Although Cramer said he felt like panicking when he read the story, he didn't because that's against the rules. And when you break the rules, you lose money, he said.

If people sold cardiovascular companies and hospitals because of this story, then they walked right into a trap because this headline was old news on Wall Street, he said.

Kenneth Weakley wrote a report on this topic three months ago. If people sold, they lost. However, if people had read Weakley's report, it could have saved them, he said.

Weakley is a best-of-breed analyst, Cramer said, adding that Weakley knows headlines before they become headlines.

Cramer believes that people should own medical stocks -- not sell them. Weakley, who recommends buying Johnson & Johnson, said that hospitals would lose the most from the government cuts.

Cramer believes that St. Jude Medical ( STJ) and JNJ could make people some mad money, but headlines will not always make you money, he said. That's why you have to do your homework.

In Cramer's "Mad Mail" segment, a viewer asked why he didn't mention stocks such as Consolidated Edison ( ED) and Apartment Investment & Management ( AIV) when he did a show on defensive plays and dividends.

Cramer said that the reason he didn't talk about those two stocks was a question of how he and his team put the show together. However, he said, the viewer is right about those two stocks, and they are good and should also work.

When a viewer said Cramer might have bailed out on Headwaters ( HW) too soon, Cramer said the company has some credits that go away if oil goes high.

Cramer said that he often invites a CEO to the show in hopes of hearing the company's story, but Headwaters' CEO Kirk Benson didn't seem to want to share it with him.

Cramer said he thought Headwaters was cheap and that's why he brought Benson on the show, but that he didn't feel the same way after he talked to Benson.

Lightning Round

Cramer was bullish on Rentech ( RTK), Coca-Cola ( KO), PepsiCo ( PEP), Oracle ( ORCL), Target ( TGT), Halliburton ( HAL), EuroZinc Mining ( EZM), Peabody Energy ( BTU), Intel ( INTC) and Starbucks ( SBUX).

Cramer was bearish on Travelzoo ( TZOO), National Beverage ( FIZ), EnCana ( ECA), Wal-Mart Stores ( WMT), RTI International Metals ( RTI), Alvarion ( ALVR), Massey Energy ( MEE), Nortel ( NT) and Microsoft ( MSFT).


For more of Cramer's insights during the most recent Lightning Round, click here .

Here's your chance to pick the stock you'd like me to feature on my radio show July 20:
Ford
Forest Labs
PepsiCo
Marriott
Activision
SAP

REMEMBER to listen in on Thursday for my take on the stock that wins this poll!

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 and Halliburton.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on Mad Money are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

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