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"Healthcare stocks have nothing to fear," Jim Cramer told viewers of his "Mad Money" TV show Thursday. He reiterated his belief that the healthcare sector is the place to be given the current market conditions. He expects big money managers to flock to the historically recession-proof stocks and advised investors to get in ahead of the rotation. Cramer recommended Hospira ( HSP) as his next investment idea in the group. Hospira, he said, is transforming itself from a boring drug delivery and medication management company into a faster growing, higher-margin oncology powerhouse. Hospira was spun off by Abbott Labs ( ABT) back in 2004, and after a rocky start, Cramer said, the company is finally starting to gain some traction. The company has met or beat earnings expectations for the past seven quarters in a row, giving it a solid track record of results, he said. Hospira is currently the No. 1 maker of specialty injectable pharmaceuticals, with 17% market share in the U.S. The company also has real potential for growth in Japan, where generic drug use by the government-run healthcare system accounts for only 16% of all drugs used, compared to 50% in the U.S. Cramer is especially high on Hospira's injectable oncology division, after the company's purchase of Mayne Pharmaceuticals in February, 2006. This business, he said, provides Hospira growth that Wall Street has failed to notice.
"Healthcare stocks have nothing to fear," Jim Cramer told viewers of his "Mad Money" TV show Thursday. He reiterated his belief that the healthcare sector is the place to be given the current market conditions. He expects big money managers to flock to the historically recession-proof stocks and advised investors to get in ahead of the rotation. Cramer recommended Hospira ( HSP) as his next investment idea in the group. Hospira, he said, is transforming itself from a boring drug delivery and medication management company into a faster growing, higher-margin oncology powerhouse. Hospira was spun off by Abbott Labs ( ABT) back in 2004, and after a rocky start, Cramer said, the company is finally starting to gain some traction. The company has met or beat earnings expectations for the past seven quarters in a row, giving it a solid track record of results, he said. Hospira is currently the No. 1 maker of specialty injectable pharmaceuticals, with 17% market share in the U.S. The company also has real potential for growth in Japan, where generic drug use by the government-run healthcare system accounts for only 16% of all drugs used, compared to 50% in the U.S. Cramer is especially high on Hospira's injectable oncology division, after the company's purchase of Mayne Pharmaceuticals in February, 2006. This business, he said, provides Hospira growth that Wall Street has failed to notice.
| Cramer: The Tide's Turned for Drug Stocks |
Cramer also liked the fact Hospira is cutting costs. The company closed five facilities, which should add 9 cents a share to the company's 2010 earnings. It has also increased its operating margins, from 14.9% in 2004, to just over 16.9% today, with the goal of reaching 19.9%. "I think Hospira has what we want from the healthcare stock," said Cramer. 
Cramer cited five of Chesapeake's previous secondary offerings, noting that all five have made money in the past. The company issued shares on March 27, 2008 at 26% below the current share price; on Sept. 26, 2007 at 48% below the current price; on June 27, 2006, at 53% below the current price; on Sept. 8, 2005, at 47% below the current price and on Sept. 9, 2005, at 76% below the current price. Cramer also voiced his support for Chesapeake CEO Aubrey McClendon, whom he said is the most bankable CEO in America.
Getting Back In
"I think the moment's right to start buying natural gas," Cramer told viewers. After warning that the sector would be hit and hit big last Wednesday, Cramer said it's finally time to get back into the natural gas stocks. Cramer said he's still a fan of Chesapeake Energy ( CHK), but not for the reasons viewers might think. Last night, Chesapeake completed a secondary offering of 25 million shares at $57.25 a share. Today the stock closed at $61.58 a share for a 6.7% gain in just a single day. "That's the all-clear signal we've been waiting for," said Cramer. He said that secondary share offerings normally are bad for current shareholders and dilute value. However, that's not the case with Chesapeake because the company plans to use the money to increase drilling, a move that's seen as wildly bullish for the stock, he said. HMO Woes
In the "Sell Block" segment, Cramer gave viewers a list of stocks which he said are the real losers of the new Medicare spending bill that Congress just passed Wednesday. According to Cramer, the managed care providers will be hardest hit by the new $12.5 billion spending package. Cramer told viewers to "stay the heck away from the managed care companies." He said that Healthspring ( HS), which gets 88% of its revenues from Medicare, will be hardest hit by the new plan. Also on the list are Humana ( HUM), Coventry ( CVH), HealthNet ( HNT) and Triple-S ( GTS), all of which have Medicare exposure. Cramer also added former favorite United Healthcare ( UNH), which only has 12% exposure to Medicare, to the list, calling the company "a serial destroyer of wealth." Cramer said managed care companies are also poised to be hit by the shrinking economy. "When unemployment rises, membership in HMO goes down," he said. With these companies getting hit from both ends, Cramer said they just can't be owned.Wachovia's New CEO
Cramer had high praise for Treasury Under-Secretary Bob Steel, who resigned his position to head the ailing Wachovia Bank ( WB). He called Steel "one of the great behind the scenes player" and one of the integral players behind the recent JP Morgan Chase ( JPM) and Bear Stearns ( BSC) merger. Cramer said the turn-around of Wachovia will take time, and he's still would not be a buyer of the bank at this time.Sudden Death
Cramer was bullish on Clean Harbors ( CLHB), Spectra Energy ( SE) and Johnson & Johnson ( JNJ). He was bearish on CVRD ( RIO).