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After experiencing a week like last week, people have a tendency to bargain hunt, Jim Cramer told viewers of his "Mad Money" TV show Monday.

However, when you go shopping for damaged goods, while looking at the stock's price tag, remember to also take the company's fundamentals into consideration, he said.

Everyone shops for damaged stocks, said Cramer. But if you don't know how to do it right, you could run into some problems and end up losing money, he said.

Amazon.com ( AMZN), a stock that is being beaten up, is an example of a stock that is not worth buying, he said.

Though some investors might want to buy it because it's so cheap, Cramer said that a stock that goes down doesn't necessarily become cheaper.

People should first compare the damaged stock with other stocks of similar businesses, he advised. Although Amazon sells a lot of products, in the end it's a bookstore.

"If you want to know whether it's worth buying, forget that it sells anything else," Cramer said. "Keep it simple."

Comparing it with Borders ( BGP) and Barnes & Noble ( BKS), Cramer said that Amazon is expensive.

Amazon is a $14 billion company, therefore people should realize up-front that it's too big to be a takeover target. Borders, on the other hand, is a $1.1 billion company, and Barnes & Noble is a $2.2 billion company.

A stock's value equals its growth and its price-to-earnings multiple. With the company's multiple, you can compare stock prices. Amazon sells at 44 times earnings, which is expensive, Cramer said. Barnes & Noble sells at 15 times earnings, and Borders sells at 12 times earnings.

Next, after looking at each company's growth, Cramer said Amazon is not cheap when compared with the other two companies.

It needs to come down a lot more before it can be a buy, he said, adding that Amazon's earnings growth is decelerating, and it needs to be trading at half of where it is now.

Although some analysts might argue that Amazon sells things other than books, it hasn't really made headway in another area, Cramer said.

It is damaged goods and is failing to expand beyond books. The company is in an overpromise, under-deliver mode, and Cramer believes that people should stay away from it.

In fact, Cramer believes that Barnes & Noble, which is buying back stock hand over fist, may be too cheap here. Cramer predicted that the company is going to report a bad quarter. He advised people to wait until this happens and then buy some Barnes & Noble.

Satellites of Like

Unlike Amazon, there are stocks that do get cheaper as they go down, Cramer said. However, there are few analysts that understand which ones are good and which ones are not.

There are analysts that will keep telling people to buy stocks as they sink and to sell when they have bottomed.

A perfect example of this is AT&T ( T), he said. Analysts loved this stock when it was in its $30s, $20s and in the teens, whereas Cramer said he despised it.

However, when the stock got down to $6, all the analysts turned on it. They decided to hate it after it had plummeted, he said. Meanwhile, AT&T was becoming more valuable compared with all the other companies in its sector as it went down.

AT&T was the perfect takeover target at $6, Cramer said.

Right now, in real time, the same thing is happening to XM Satellite Radio ( XMSR). Cramer said he hated it while it was in the $30s, $20s and teens, but now it's at $11.60, and he believes that it's not just a buy, but a triple buy.

He said he knows for a fact that the stock has bottomed because CIBC analyst Jason Helfstein, who was telling people to buy XM Radio in its $30s, $20s and teens, has cut and run from the stock, at which point anybody who was in the stock on the advice of CIBC sold it.

When an analyst who has been consistently wrong about a stock changes his or her mind about it, you should change your mind about it too and do the opposite of what the analyst thinks you should do, Cramer said.

At $11.60, XM Radio is now a $3 billion company and is the perfect takeover target, just like AT&T was, he said.

XM Radio has some problems with the Federal Trade Commission, but it is a short-term issue, he said.

It would cost Sirius Satellite ( SIRI) $4 billion to buy XM Radio because the company has $1 billion in debt.

But Cramer believes that buying XM Radio would be good for the company because Sirius could have a monopoly in the sector.

"Right now there is genuine competition, and it's hurting both companies," he said, adding that the iPod is not a threat, and the companies offer more than just music.

The only thing hurting the companies now is competition, he said, adding that he believes XM Radio has hit bottom and could be bought by Sirius here -- and make you some mad money.

Cramer said we are heading into a Fed-mandated recession unless it stops raising rates.

The last time this happened was five years ago, he said. At that time, cereals, soaps and soups performed well for six months.

The exact same thing is happening again, and we are in month three right now, Cramer said.

We have about three-and-a-half more months where PepsiCo ( PEP), General Mills ( GIS) and Heinz ( HNZ) should perform well.

"Look over your stocks," Cramer advised. "If you own anything that peaked on May 11, you need to use last week's strength to lighten up on these stocks."

These stocks will have 14 more bad weeks before things start getting better, so trim back your positions now and buy more financials and soft goods, Cramer said.

Cramer suggested Altria ( MO), which he owns for his charitable trust, Action Alerts PLUS , for soft goods and Wells Fargo ( WFC) for a financial stock.

Vox Humana

Cramer welcomed Humana ( HUM) CEO Mike McCallister to the show and asked him to explain how significant increases in Medicare membership and better-than-expected earnings in Medicare Advantage could continue.

"Our approach all along has been to grow the PDP program, which is just the drugs, because we believed over time the opportunity to move these people into Medicare Advantage was going to provide a longer-term growth opportunity for us," McCallister said.

"We've taken a view of Medicare as a longer-term opportunity, as opposed to just a drug offering this year," the CEO said.

McCallister went on to say that the company has done a lot of research with seniors. Although more than 80% of seniors have some sort of drug coverage, McCallister said there are still 4.2 million out there who could enroll in the latter part of this year.

In fact, he said, the company announced today that it is going to invest more in marketing efforts in the latter half of 2006.

Humana has had the first unbelievable quarter of many, Cramer said. This is the one to buy when Aetna ( AET) and Cigna ( CI) mess up, he said.

To view Cramer's interview with Mike McCallister, please click here .

Lightning Round

Cramer was bullish on Nokia ( NOK), Garmin ( GRMN), Global Imaging Systems ( GISX), Southern ( SO), Glaxosmithkline ( GSK), MetLife ( MET), Prudential ( PRU), Allstate ( ALL) and Genzyme ( GENZ).

Cramer was bearish on Rackable Systems ( RACK), Brunswick ( BC), International Paper ( IP) and Alkermes ( ALKS).

In his "Sudden Death" round, Cramer was bullish on Black & Decker ( BDK) and bearish on Wal-Mart ( WMT).


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 Aug. 3:
Avon Products
Comcast
Hewlett-Packard
Martin Marietta
Northrop
Vulcan Materials

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.

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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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.