Cramer's 'Mad Money' Recap: Italy Outduels Buffett (Final)

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NEW YORK ( TheStreet) -- "Today's market was a heavyweight fight between Italy and Warren Buffett," Jim Cramer told his "Mad Money" TV show Monday. But the famed "Oracle of Omaha," he noted, can't save us forever.

Cramer explained that Italy once again drove down the early market trading today, with reports that an auction today of five-year bonds saw the embattled country's interest rates climb a full 1% from just a month ago. He said that with Italy will need to borrow $260 billion over the next year to stay afloat, the stunning rise in financing costs will clearly weighed on the markets.

But then Warren Buffett appeared on CNBC to talk about his 5% stake in IBM ( IBM), a stock which Cramer owns for his charitable trust, Action Alerts PLUS . Cramer said that Buffett's endorsement of IBM was meaningful, as the company is delivering on its five-year growth plan and the stock has rallied some 28% so far this year.

Cramer said that Buffett didn't stop there. Buffett also endorsed other companies like Macy's ( M) and Coca-Cola ( KO), another Action Alerts PLUS name. Buffett was essentially bullish on the entire U.S. market, saying that he's not selling anything in order to make his recent purchases.

But for as bullish as Buffett was today, Cramer said that unfortunately, he won't be on the airwaves calming the markets again tomorrow. Italy, on the other hand, will be. "Italy will get the last word," said Cramer, "and there will be no rematch."

Natural Gas Engine Payback Narrows

Kicking off "Green Week," Cramer once again sat down with Andrew Littlefair, president and CEO of Clean Energy Fuels ( CLNE), in his "Executive Decision" segment. Clean Energy Fuels is set to open 150 natural gas fueling stations this year but its company shares have fallen 15% for the year.

Littlefair said that America's transition to natural gas is finally starting to happen. He said the next generation of truck engines is rolling off the assembly lines and those engines only cost $35,000 more than their diesel counterparts.

With natural gas costing on average $1.50 per gallon less than diesel, the payback on those engines is now just one year, said Littlefair. Just a few years ago, he noted, that difference was $100,000 and in a few more years it will likely be between $10,000 and $15,000.

Littlefair said he's not giving up on Congress passing tax incentives on natural gas, but he no longer feels the industry needs to have the bill in order to succeed. "It'll just make it happen faster," he said.

So how big is the payoff for America? Littlefair said if just 150,000 of the 3 million trucks on America's roads switched to natural gas, it would reduce oil imports by 1.5 billion gallons and give the U.S. serious leverage over OPEC and foreign oil.

Littlefair also mentioned natural gas cars as well. He said that Honda Motor ( HMC) announced it is rolling out its natural gas Civic nationwide. And while some consumers are scoffing that natural gas cars sacrifice their trunk space in order to accommodate a natural gas tank, Littlefair said there's no reason why the tanks can't be moved underneath the car once demand picks up.

Littlefair and Cramer agreed that America needs this transition in order to be cleaner, to employ more people and to become energy independent, something it can and must do for its long-term well being. Cramer said this quarter was a breakout quarter for Clean Energy Fuels and he remains bullish on the stock.

Meaningful Metric

When comparing two stocks on price, you have to look at more than just the multiple, Cramer told viewers, as he examined two grocery store chains, SuperValu ( SVU) and Whole Foods ( WFM) to see which one is cheap and which one is expensive.

Cramer said using just the multiple, SuperValu looks cheap at just 6.5 times earnings, while Whole Foods looks extremely pricey at 26 times earnings. But Cramer said that P/E multiples are only half the story, what really matters is how fast these companies are growing. Enter the PEG Ratio, a company's earnings multiple times its growth rate.

PEG Ratios make for better comparisons, said Cramer, as stocks are priced on future earnings and investors are willing to pay more for stocks that are growing faster and can deliver more earnings. He said anything with a PEG Ratio over two is expensive while anything under one is cheap.

So using this new metric, how do the two grocers compare? Cramer said that Whole Foods has a PEG Ratio of 1.44, which SuperValu is stratospheric with a ratio of 3.48.

Cramer explained that SuerValu is much larger than Whole Foods, meaning it has less room to expand and its future is not as bright as its past. Meanwhile, Whole Foods can still triple its store count and is a play on healthy eating to boot. That's why the smart money is on Whole Foods, he said.

Under the Radar

In this segment, Cramer highlighted a speculative semiconductor maker that he said is ready to rebound after declaring bankruptcy in 2009 and re-emerging earlier this year. He told investors to consider MagnaChip ( MX), a Korean semiconductor maker whose business includes a chip foundry, which accounts for 41% of sales; a display products business, which accounts for 46% of sales; and a power solutions business that offers power management solutions for smartphones and tablets.

So what's the catalyst for MagnaChip? Cramer said it's strong sales of the Samsung Galaxy series of tablets, something that was noted on the conference calls of both Skyworks Solutions ( SWKS) and Broadcom ( BRCM). He said that Galaxy sales are too small to move the needle at Samsung itself, or even at the larger chipmakers, but for MagnaChip, it could be substantial.

After emerging from bankruptcy earlier this year at $14 a share, this stock has been hammered down to just $7, said Cramer, making it incredibly cheap at just five times earnings. MagnaChip also only has three analysts covering the stock, leaving lots of room for upgrades.

Cramer warned that MagnaChip is a very small stock and all of his usual precautions apply. Do not buy in after hours, use limit orders and be patient, he said. There is no immediate need to buy this stock, said Cramer, "do not pay up for up."

Lightning Round

Cramer was bullish on Juniper Networks ( JNPR), Nordic American Tanker ( NAT), FedEx ( FDX), United Parcel Service ( UPS), Union Pacific ( UNP) and Eaton ( ETN).

Cramer was bearish on Barnes & Noble ( BKS) and Overseas Shipholding Group ( OSG).

Closing Comments

In his "No Huddle Offense" segment, Cramer tipped his hat to both Warren Buffet and Mark Cuban, two celebrity investors who spoke out against credit default swaps and high-frequency trading on CNBC earlier today.

Cramer said that too often, the creators of these exotic trading instruments rebut that they're simply smarter than their critics and that these instruments pose no threat to individual traders or the markets. But Cramer said that Buffett and Cuban are not simple critics, they're sophisticated traders and investors, and if they say these instruments are bad, people should listen.

Buffett called credit default swaps "anti-social" and said they simply should not be allowed, while Cuban said that high-frequency traders act like "hackers" attacking the markets.

Cramer said he's been on record for ages saying that these instruments are wrecking the playing field for the little investor and he's glad to see Cuban and Buffett agree.

--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 IBM, Coca-Cola. long

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