Cramer's 'Mad Money' Recap: Bears Take a Hit (Final)

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NEW YORK ( TheStreet) -- "The bear case has taken a hit," Jim Cramer announced to his "Mad Money" TV show viewers on Wednesday.

He said the bears may be well entrenched in their thinking, but that thinking is looking a lot less like reality.

Cramer noted that a high number of bearish investors typically signals a bottom, as there are fewer bulls willing to change their minds and sell out.

He cited a survey that showed some 46% of all investors are now bearish on the markets, with another 18% looking to buy back in after a correction. But this time, the bears are so dug into their thesis that a collapse in euro will take out the U.S. economy, it doesn't look like anything will shake them loose, he said.

Cramer said the premise that there are rising interest rates in China, a double-dip recession in the U.S. and wholesale collapse of Europe simply doesn't hold water any longer. He said U.S. jobless claims are firming up, businesses have more confidence and everything from aerospace to auto sales to retail are beginning to look positive.

Case in point, Pepsico ( PEP), which beat lowered estimates and rallied on the news that its price increases are sticking, countering cost inflation. Even when the embattled Alcoa ( AA) missed numbers by a mind-boggling 33%, the stock was only down 2.4%. Cramer said these two stocks both point to a fledgling market bottom.

"We may not be home free," Cramer concluded, "but there are simply too many bears for it to become a reality."

Silver Lining

"Commodity costs are falling," Cramer told viewers, and that means it's time to buy an unlikely stock.

Cramer said over the past few weeks, we've heard from a number of sources that commodity costs, everything from the price of plastics to aluminum to steel, are all on the decline. The markets have also heard that grain prices are falling, as is the price of oil and natural gas. Even the price of gasoline is now well off its recent highs.

So what's that mean for the markets? Cramer said it means great things for consumers, which buy all of these goods, but it's also great news for emerging markets and especially China. Cramer explained that with commodity prices falling, the Chinese can finally stop tightening interest rates, which will be a boon for the global economy.

This will mean good things for packaged goods makers like Kimberly-Clark ( KMB), said Cramer, as the company has already put in price increases to combat rising costs, but can now enjoy margin expansion as its costs begin to fall.

But Cramer noted that the surprise winners from falling commodity costs are the automakers, companies like Ford ( F). Cramer said falling steel prices are great news for automakers, but so to is the news that the world's emerging markets, the real drivers of the industry, are finally hitting bottom. Cramer said investors should begin backing up the truck on Ford.

Too Cheap to Pass Up

"Everything has a price," quipped Cramer, even Avon Products ( AVP), a company Cramer last panned in April. Since then, shares of Avon have fallen an additional 21%.

But with Avon now yielding 4.2%, Cramer said he's changing directions on the beauty products maker, as its shares are simply too cheap to pass up. Even though the company may still have questionable management, Cramer said its business model of direct selling is not only sound, but has also been proven to work by others like Herbalife ( HLF) and Tupperware ( TUP).Avon gets 75% of its revenue from emerging markets, the exact markets that are beginning to bottom.

So how cheap is Avon? Shares trade at just 9.7 times earnings with a growth rate of 10%. The company also has enough earnings to pay for its dividend twice over, making it cheap on a yield and earnings basis.

Cramer admitted that after growing too rapidly a decade ago, Avon has basically been restructuring since 2005. But with a 4.2% dividend, he said the company is paying investors to wait, and its restructuring will have to bear fruit eventually.

Am I Diversified?

Cramer spoke with callers to see if their portfolios have what it takes. The first caller's portfolio included Citigroup ( C), Chicos ( CHS), Ford ( F), Micron ( MU) and Nike ( NKE).

Cramer said that Chicos and Nike were both fashion plays. He recommended selling Chicos in favor of some Sanofi-Aventis ( SNY).

The second caller's top holdings included First Niagara Financial ( FNFG), Intel ( INTC), AT&T ( T), Nucor ( NUE) and Nordic American Tankers ( NAT).

Cramer said this portfolio was beautifully diversified.

The third caller had Alcoa ( AA), IBM ( IBM), CapitalOne Financial ( COF), 3M ( MMM) and Apple ( AAPL).

Cramer said that he would allow both Apple and IBM in the same portfolio as Apple is often considered its own asset class.

The fourth caller's top stocks were Phillip Morris International ( PM), Procter & Gamble ( PG), Conoco-Phillips ( COP), Southern Company ( SO) and SPDR Gold Shares ( GLD).

Cramer said he was a big fan of this portfolio.

Lightning Round

Cramer was bullish on AT&T ( T), Chevron ( CVX), Freeport-McMoRan ( FCX), Cisco Systems ( CSCO) and Manitowoc ( MTW).

He was bearish on InterDigital Communications ( IDCC) and Molycorp ( MCP).

Apple Does It Again

In his "No Huddle Offense" segment, Cramer wondered when was the last time a new product introduction moved the needle. That was certainly the case with the iPad for Apple ( AAPL), which he also owns for his Action Alerts PLUS portfolio, and now it is again with the iPhone 4S.

Cramer praised Apple's new voice recognition system and its improved camera that rivals dedicated devices worthy of countless upgrades, saying it could potentially wreck havoc on the PC market as we know it. He said that people who use iPhones and iPads may soon ditch their laptops, which would change everything.

Cramer said there was only one man who could have thought up such innovation and that man was Steve Jobs. "Time to raise numbers on Apple," said Cramer, and lower those of Hewlett-Packard ( HPQ).

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

To contact the writer of this article, click here: Scott Rutt.

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At the time of publication, Cramer was long Apple.

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