Cramer's 'Mad Money' Recap: Oct. 28

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There's a way for investors to predict huge one-day rallies like Tuesday's 889-point gain in the Dow Jones Industrial Average, Jim Cramer told the viewers of his "Mad Money" TV show.

And that is to use Apple ( AAPL) as a barometer to get a sense which way the market is heading, he said.

While there was a plethora of positive news today, including the end of the strike at Boeing ( BA), positive moments in Asia and Hong Kong and rumors of a U.S. and European interest rate cut, Cramer said Apple is the true litmus test for the market.

Simply put, Apple has the best fundamentals, the best balance sheet and the best growth of just about any company, said Cramer. That's why if Apple's stock price is falling, the markets are clearly headed lower.

Apple's most recent quarterly results were simply a thing of beauty, he said, with the company reporting $1.26 a share against the analysts' estimate of $1.11. The company also announced that it sold more than 6 million iPhones in the quarter, making it now the third largest supplier of cell phones in the world.

Yet Apple trades just 15 points from its 52-week low at 14 times its earnings compared to the 40- to 50-multiple it has fetched historically. The company has $24.5 billion in cash, which equates to almost 30% of its current share price.

But Cramer said the takeaway from Apple is not that it's a solid performer or that the stock is cheaper than any growth stock he's ever seen. Cramer said the real takeaway is that Apple is now the barometer for the market.

"When Apple goes higher, the rest of the market comes with it," he said.

Cramer: Can't Trust a Rally

An Obama Stock

Investors looking for stocks that will rally in an Obama presidency need look no further than AeroVironment ( AVAV), Cramer told his viewers.

Stockpickr

While many pundits fear Obama will slash defense spending if elected, Cramer said AeroVironment, maker of unmanned aerial vehicles, will be one company that will avoid the axe.

Cramer talked with AeroVironment's chairman and CEO Tim Conver to find out if this small defense play can live up to his expectations.

Cramer recommended the stock before its IPO on Jan. 7, 2007, and again on March 8, 2007 at $21.43 a share. Since then, the stock has risen 40%, even in a bear market.

Conver said that his company pioneered the small, unmanned airplane business and has no plans to cede it to the large defense players. He said AeroVironment competes and wins against the big players all the time, and with the company constantly innovating, it expects to maintain its lead.

Conver also said that AeroVironment has huge growth opportunities because it sells products not only to the U.S. military but also to many NATO allies.

Asked about possible defense spending cuts and whether UAVs can hold up against spending for larger, more traditional aircraft, Conver said the UAVs save lives and will continue to be compelling for years to come.

Cramer said he's still a big fan of AeroVironment. With its clean balance sheet, no debt and growth opportunities, he called the company one of the few stocks that he believes will rally under an Obama administration.

A Cash Floor

In a turbulent market, Cramer said investors need to consider stocks with limited downside risk that trade at or near their cash value. That's why he's recommending women's clothing retailer Bebe Stores ( BEBE) as a great valuation play.

BankingMyWay

Cramer called Bebe a true fallen angel that was on fire a few years ago, with same store sales up a solid 9.5% in 2004.

However, after merchandising and inventory blunders, coupled with shrinking mall traffic fueled by higher gas prices, the company's same-store sales growth shrank from just 2.9% in 2007 to -7.6% in fiscal 2008.

But Cramer said a turnaround may now be upon us, with the company's inventory turnover improving and guidance finally lowered to a level that Bebe can beat.

"The bad news is already in the stock," he said.

Cramer said he also likes the company's cash position, with $4 per share currently on the books. Bebe also announced a sizable stock repurchase plan on Oct. 22, authorizing the buyback of 30 million shares, or 19% of the company's float. Cramer also likes the company's 2.8% dividend yield and the fact it has no debt.

Although Cramer's not sure exactly when the turnaround in Bebe will happen, he said "this one is worth waiting for," given its huge cash position, buyback and dividend.

Mad Mail

In this segment, Cramer told a viewer that while Activision ( ATVI) come down enough to become intriguing, he doesn't expect a strong Christmas and would still stay away.

Cramer told other viewers that he'd be a buyer of Avon Products ( AVN) during a recession, but a seller of Lexmark Int'l ( LXK), Toyota ( TM) and Affiliated Computer Systems ( ACS).

Cramer told the final viewer that he's standing behind his recommendation of Lender Processing Systems ( LPS) as a great recession stock.

Lightning Round

Cramer was bullish on Almost Family ( AFAM), Caterpillar ( CAT), Bank of America ( BAC), Wells Fargo ( WFC), BB&T Corp ( BBT) and Goldman Sachs ( GS).

He was bearish on Citigroup ( C).

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

Read more of Cramer's Mad Money Lightning Round insights.

For "Mad Money" performance statistics and other links, check out Mad Money stats

At the time of publication, Cramer was long Goldman Sachs.

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. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. 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.

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