Cramer's 'Mad Money' Recap: News That Matters (Final)

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"Don't let the stories in the newspapers cloud your judgement on the markets," Jim Cramer told viewers on his "Mad Money" TV show Tuesday.

He said newspapers are in the business of selling papers, not reporting on what's important. Investors who take their cues from the papers, he said, will be misled.

Using today's major papers as examples, Cramer showed viewers the "headlines" of the day, including several major stories on how the auto and airline industries are in the amidst of a terrible summer, with a horrible fall season looming large.

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"This is not news," said Cramer, noting that the airlines and the autos have been in decline practically his entire career. "News is something, well, new," he said, "something you can't predict."

What is real news? Cramer said it's railroad CSX ( CSX) beating its numbers. He said it's semi-conductor equipment maker Novellus ( NVLS) not getting crushed at this point in the economic cycle.

Yet he said neither of these stories are being covered because they don't sell papers.

According to Cramer, both CSX and Novellus are newsworthy, because unlike the airlines and the autos, these companies cut costs, made the hard decisions and made themselves competitive in an increasingly competitive and challenging market. "These companies are the opposite of the autos and airlines," he said.

Cramer cautioned investors to be cynical of news headlines and do their homework to dig out the real news and the real winners in the market.

A Turnaround Story

Shares of media giant Viacom ( VIA-B) are just too cheap. That was Cramer's assessment on the heels of Spongebob Squarepants' tenth anniversary later this week.

Dressed in a Spnogebob costume, Cramer told viewers that with the Spongebob franchise worth an estimated $8 billion, two-thirds of Viacom's total enterprise value, the rest of the company is significantly undervalued. Trading at just 9 times its estimated 2010 earnings, Viacom lags its peers and has been a serial disappointer since it was spun off from CBS ( CBS)three and a half years ago.

But he said Viacom is a turnaround story, with the company profiting from successful franchises like Spongebob and Transformers. The company's movie marketshare is on the rise with fewer and fewer independent movies being released, said Cramer. Likewise, Viacom's cable properties, like MTV and Comedy Central, are also improving in viewership and profits.

Cramer said while there is no catalyst to drive the stock higher, it's clear that Viacom is worth more than the price it's fetching today. The company is also worth more split up than it is as a combined company, he said.

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Rick Bensignor over the fate of the energy sector. Using the Energy Select SPDR ( XLE), Bensignor said the energy stocks are a buy and Cramer agreed, sort of.

According to Bensignor, after underperforming the S&P500 for over a year, the Energy Select Spider index is now approaching its 200-week moving average, meaning the sector should be bought. Since energy accounts for 12.4% of the S&P500 index, Bensignor feels the energy sector must be overweighted.

Cramer agreed with Bensignor that energy is poised for a rebound, but instead of buying an index like the Energy Select Spider, he suggested only buying the best of breed, like Chevron ( CVX), a stock which he owns for his charitable trust, Action Alerts PLUS .

According to Cramer, Chevron, with it's 4.1% yield, has the highest production growth in the industry, a metric that causes investors to pay up for the stock. The company also has an iron clad balance sheet and is poised to continue that record growth rate.

So while energy may be the place to be, Cramer said the real place to be is with the best of the best, and that's Chevron.

Weathering the Economy

Cramer welcomed Don Wood, president and CEO of the Federal Realty Investment Trust ( FRT), to get an update on the state of commercial real estate.

Wood said that while commercial real estate is not often talked about, it should be a part of everyone's portfolio. He said that Federal has rewarded its shareholders with increases in the company's dividend every year since 1967. He also said that his company has outperformed many of the commercial REIT indices for the past nine years running.

Wood said Federal's success comes from a diversified portfolio of high quality retail properties that include such stores as Target ( TGT) and Lowes ( LOW), in addition to high quality malls. According to Wood, 75% of the company's properties are anchored by grocery stores, further helping them to weather the economy.

Cramer said he's a believer in Federal Reality and would be a buyer of this high yielding stock.

Lightning Round

Cramer was bullish on MannKind ( MNKD), Gilead Sciences ( GILD), FPL Group ( FPL), Consolidated Edison ( ED), Exelon ( EXC), Progress Energy ( PGN) and Dominion Resources ( D).

He was bearish on Tortoise Energy Infrastructure ( TYG) and Dolby Labs ( DLB).

Check out the latest edition of "Cramer's Take on Top-Searched Stocks" on Stockpickr.

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For more of Cramer's insights during the Lightning Round, click here .
At the time of publication, Cramer was long Chevron.

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