NEW YORK ( TheStreet) -- "The second blastoff of the financial stocks is beginning now," an excited Jim Cramer told the viewers of his "Mad Money" TV show, as he outlined 10 reasons to buy the banks. Cramer said the critics are still predicting a meltdown in the sector, but he said these pundits were wrong a year ago, and they'll be wrong again, as the financials begin a second ascent.
A Giant BreakupCramer said the pending breakup of energy giant McDermott ( MDR) has created an opportunity that's too juicy to ignore. He said after the company splits, there will be two ways to play energy, one that favors President Obama's agenda, and one that doesn't. In the "pro" Obama camp will be a company to be named Babcock & Wilcox, which manufactures industrial power generation systems perfect for retrofitting old coal fired power plants. Babcock will also have a nuclear arm that will be manufacturing steam generation units for nuclear facilities. And finally, the company will have exposure to biofuels, hitting a triple play in Obama's energy agenda. Babcock will also have a $4.6 billion backlog of business. In the "anti" Obama camp will be a company named J. Ray McDermott, which will concentrate on off-shore drilling rigs, helping big oil companies around the globe drill more to replenish dwindling reserves. It would be moving against the Obama agenda, which does not favor increased drilling. J. Ray will have a $3.9 billion backlog when it comes public. Cramer said as it stands now, he's not a buyer of McDermott, the combined company, as it has no earnings momentum. However, Cramer said the breakup should unlock $5 to $7 a share of value, which makes it too big to ignore. After the split, Cramer said investors can choose which company to keep based on their personal politics.
Metallurgical Coal Demand"Not all coal is created equal," Cramer told viewers. That's why he recommended Walter Energy ( WLT), the country's leading producer of metallurgical coal, used in the production of steel. Cramer explained that thermal coal, the type used in power generation, is seeing demand fall, as utilities have begun to shift away from coal-fired plants in favor of natural gas and other cleaner sources. He said that in the U.S., the thermal coal market has already shrunk by over 30 million tons. Metallurgical coal, however, is on fire, said Cramer, with demand coming squarely from China, which has recently gone from a net exporter to a net importer of coal. In 2008, China imported 7 million tons of metallurgical coal for steel production. In 2009, that number rose to 25 million tons. And so far in 2010, the Chinese have already placed orders for 7 million tons, on target for over 28 million by year's end. Cramer said Walter is the natural choice for metallurgical coal, as 90% of its income is tied to the commodity. With the annual benchmark pricing season upon us, Cramer said Walter should benefit big, as 60% of its 2010 production is yet to priced. Walter, with just $11 million in debt, has $165 million in cash on its books. Cramer said the stock is cheap, trading at just 9.1 times its earnings and should make out like a bandit as the demand for metallurgical coal continues to grow.
Am I Diversified?Cramer spoke with with callers to see if their portfolios have what it takes. The first caller's portfolio included Panera Bread ( PNRA), Kirkland's ( KIRK), Apple ( AAPL), Symetra ( SYA) and Weatherford ( WFT). Cramer said the portfolio is perfectly diversified. The second caller's top holdings included Intermune ( ITMN), Hecla ( HL), Akamai ( AKAM), Toyota ( ¿) and Ford ( F). Cramer identified two of a kind with Ford and Toyota, and recommended selling Toyota in favor of an industrial like Honeywell ( HON), a stock which he owns for his charitable trust,
Lightning RoundCramer was bullish on Electronic Arts ( ERTS), Incyte ( INCY), Cognizant Technology ( CTSH), Monro Muffler ( MNRO), Gastar Exploration ( GST), Corning ( GLW), Cree ( CREE), Netflix ( NFLX) and First Niagara Financial ( FNFG). He was bearish on THQ ( THQI), Satyam Computers Services ( SAY), Tyson Foods ( TSN) and Radian Group ( RDN).
Closing CommentsCramer told viewers that the secondary offering from EQT ( EQT) is an excellent buying opportunity and investors should get in on the deal. -- Written by Scott Rutt in Washington D.C. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.