Budget Fears Casualty

Sometimes stocks go down for the wrong reasons, Cramer told viewers. Case in point, HealthSouth ( HLS), a provider of in-patient rehabilitation centers that's received a 15% haircut thanks to fears the budget talks in Washington will reduce Medicare payments.

Cramer said while it's true that HealthSouth does receive 70% of its revenues from Medicare, the truth is that rehab centers already went through a major restructuring. He said the HealthSouth of today operates at 2004 levels, thanks to aggressive cost-cutting and restructuring.

That makes HealthSouth attractive, said Cramer, as this operator of 97 in-patient facilities currently generates $400 million in free cash flow and is valued at just $2 billion, a sweet spot for takeover suitors. Shares of HealthSouth currently trade at 17.6 times earnings and the company has a 12.8% growth rate.

But even without a takeover, Cramer said he'd be a buyer of HealthSouth, as many of its competitors are either non-profits or are losing money, making HealthSouth a potential acquirer as well.

Chipotle Story Still Resonates

In the "Executive Decision" segment, Cramer spoke with Jack Hartung, CFO of Chipotle Mexican Grill ( CMG), a stock that's up 130% since Cramer first got behind it in June 2010, but also one that's been under pressure after a four-cent-a-share earnings miss in its most recent quarter.

Cramer said that Chipotle's earnings were on the light side and the company's margins were squeezed as a result of legal costs associated with an undocumented worker probe and rising food prices, two things that will be resolving themselves in the current quarter. Cramer noted that same-store sales were up 10% and the company opened 39 new locations in the quarter.

Hartung agreed with Cramer's assessment, saying that the revenue side of Chipotle is very healthy, but the company is experiencing some short-term challenges with costs. He said overall, customers appreciate Chipotle's fast, friendly service, and the company expects that it can serve upwards of 300 customers an hour at its locations, which means increased sales in the future.

Hartung also explained that Chipotle is not so much focused on growth as it's focused on culture and its business model. He said Chipotle aims to delight every customer, and is constantly looking for great locations and development great leaders to run those locations. He said the company's economics are the best it's ever ever been.

When asked about Chipotle's "food with integrity" model, Hartung explained that Chipotle purchases only the highest quality ingredients and ones that are produced in a sustainable way. He said Chipotle's customers appreciate that quality and become more loyal as a result. Hartung said over time, more and more people are caring about where their food comes from, and that bodes will for Chipotle.

Cramer said he's a believer in the Chipotle story, and those that sold the stock down after its earnings release are already losing money.

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