"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.
A Turnaround StoryShares 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 ChartsIn 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,