Cramer's 'Mad Money' Recap: Gearing Your Portfolio for the Rotation (Final)

Search Jim Cramer's Mad Money trading recommendations using our exclusive Mad Money Stock Screener and watch Jim Cramer's Mad Money Post Game video exclusively on TheStreet.com.


NEW YORK ( TheStreet) -- "You can't tell from the averages what really happened today," Jim Cramer told the viewers of his "Mad Money" TV show Tuesday.

He said the name of the game today was sector rotation, and that means the good stocks, and the bad stocks, all trade in lock step.

Cramer said it didn't matter today whether you owned Kellogg ( K) or General Mills ( GIS), Colgate-Palmolive ( CL) or Procter & Gamble ( PG). "They were all good today," he said.

If it was a packaged goods company, the market loved it today, said Cramer. Even the bad companies, like Johnson & Johnson ( JNJ), which missed earnings, and Kimberly-Clark ( KMB), who lowered full year guidance, got a boost from today's action.

Where was the money for the pop in packaged good coming from? Cramer said it came at the expense of the high flying minerals and mining stocks, along with the industrials. Companies like Caterpillar ( CAT), 3M ( MMM) and Bucyrus ( BUCY) were all lower.

Cramer said this sector rotation makes perfect sense in the face of the seemingly endless rally in the "smokestack" stocks. He said the rally can't keep going forever, especially in the face of falling commodity prices, which are near one month lows. Then there is the elephant in the room, unemployment, he said, which will be front and center on Thursday, and again next week.

So how should viewers play this rotation? Cramer said investors should ring the register on their industrials, stay diversified, and consider a position in gold as insurance against uncertainty. By keeping a diversified portfolio, he said, it doesn't matter which sectors are in favor, you'll always win.

Amazon's U-Turn

In the "Off The Charts" segment, Cramer went head to head with colleague Tim Collins over the chart of Amazon.com ( AMZN), which has made a dramatic u-turn after it reported earnings last week.

Cramer explained that after reporting a nine-cent-a-share earnings miss, Amazon's stock fell 15 points, or 12%, before suddenly reversing course on Friday to recover just about all of those losses.

According to Collins, the daily chart of Amazon showed that the stock hit and held its late June lows after its plummet, alerting technicians that the stock wasn't headed any lower.

Looking at the five minute chart on Friday, Collins noted that the bullish news continued, as Amazon's stock soared out of the gate for 20 minutes, then exhibited a flag pattern, another bullish sign. With two bullish patterns in place, the momentum simply took over.

Cramer said he's not a believer in Amazon's chart, but does like the company, especially its fulfillment business, long term. He said what the charts tell us is that the charts are clearly in control, for now, but Cramer said that he's on the fence with Amazon until the company reports at least one good quarter.

"Sometimes stocks don't make any sense," he said, and when that happens it's sometimes best to wait it out.

Going Global

In the "Executive Decision" segment, Cramer sat down with Alan Mulally, CEO of Ford ( F), on the heels of the company's great quarterly earnings and the debut of the all-new 2011 Ford Explorer SUV.

Mulally recapped Ford's transformation by saying that previously, the company could not make cars profitably in the U.S., which is why Ford focused so heavily on SUVs. But now, he said Ford makes a whole family of cars in the U.S., and makes them profitably.

Mulally went on further to say that Ford is now profitable all over the world, and is seeing some of their best results in 10 years. He said the company paid down $7 billion in debt last quarter and is on its way to becoming investment grade in 2011. "Ford is dedicated to profitable growth for all," said Mulally.

When asked about sales in Europe, Mulally noted that sales have been really good for Ford, and the company is increasing market share with a great lineup of vehicles there. In China, he said, the company is playing catch up, but is also building a fantastic franchise there and is expanding as fast as possible.

Turning to more domestic issues, Mulally said that the economic recovery in the U.S. will se a slow one, but he's confident that the growth will be led by private enterprise and not government intervention.

Cramer continued his support of Ford, and Mulally, as he continues to turn around one of America's most iconic brands.

Mad Mail

Cramer told a viewer that DuPont ( DD) remains a buy in his mind, especially after the company reported a remarkable quarter, with both top line and bottom line growth.

Cramer told another viewer that Kinder Morgan Energy Partners ( KMP) would be a better choice for a beginning investor than a company like El Paso ( EP), which has a smaller share price. He said that Kinder Morgan is a best of breed player with a 6.3% dividend, and even if you can only buy a few shares, it will serve you well.

Lightning Round

Cramer was bullish on Broadcom ( BRCM), Cummins ( CMI) and Network Appliance ( NTAP).

He was bearish on Alcatel Lucent ( ALU).

-- Written by Scott Rutt in Washington D.C.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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

For more of Cramer's insights during the Lightning Round, click here .
At the time of publication, Cramer was not long any stock mentioned.

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."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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.