Are the markets jumping the gun by buying into the heavy industrial stocks? Jim Cramer told the viewers of his "Mad Money" TV show, "they are," and "that's not a bad thing!" Cramer told viewers that almost a year after the fateful collapse of Lehman Brothers, when everything looked as if the world would end, stocks are now poised to "lap" those abysmal earnings. Now faced with the easy compares from last year, it's right for investors to leap, then look, in order to get ahead of the other guys. Cramer said there is no recovery happening in stocks like Freeport McMoran ( FCX), U.S. Steel ( X) or BHP Billiton ( BHP), but, he said, six months from now things will look brighter for these companies than they do now.
Buying on the Secondary"We want stocks that know how to take advantage of weaker competitors," Cramer told viewers. That's why he recommended the stock of packaging maker Bemis ( BMS), a stock that most investors have probably never heard of. Cramer explained that Bemis is preparing a secondary offering of 7.5 million shares of stock to buy the food packaging unit of mining giant Rio Tinto ( RTP). He said the deal will be a windfall for Bemis because Rio Tinto is struggling with its debt load and is being forced to sell non-core assets. This mean Bemis is getting the unit, which includes 23 packaging plants around the globe, for a steal. The deal will be accretive to earnings in 2010. Cramer said the synergies will be huge for the new Bemis, far more than the company estimates at $65 million. The deal will also make Bemis less cyclical, and thus more attractive to investors. Bemis also touts a 3.6% dividend, which will pay investors to wait for the deal to close, he said. Cramer said he'd be a buyer of Bemis on the secondary and again if the dividend yield rises above 4%.
Weathering the RecessionAfter being stumped in last week's Lightning Round, Cramer returned this week with his thoughts on electronics retailer hhgregg ( HGG). Cramer said this was yet another case of his viewers knowing more than he does, and finding a great company. Cramer said hhgregg has three things going for it. First, the company is benefiting from the demise of rival Circuit City, giving this seventh larger consumer electronics retailer a big boost to help it weather the recession. Second, he said hhgregg has a great business model, providing high customer service and same-day delivery on many of its items. Third, he said the company's benefiting from the bottom in housing, by offering major appliances and other goods that are increasingly in demand. At just 14 times earnings, Cramer said hhgregg is a steal, especially with the company's 17.6% long-term growth rate and its national aspirations. Cramer said he'd be a buyer at or below the company's secondary offering price, especially given that the company's large private equity firms are also buying into the offering, instead of cashing out.