Cramer's 'Mad Money' Recap: Betting Against the Bears (Final)

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NEW YORK ( TheStreet) -- "It pays to bet against the bears," Jim Cramer told his "Mad Money" TV show viewers Tuesdays, after a strong rally led to a beautiful kick-off for 2012.

Cramer said the conventional bearish "wisdom" of 2011 proved to almost totally wrong, and he listed his top 10 market myths that proved to be untrue for the year just past. Cramer's market myths included:

1. The U.S. will be the worst performing market of the year.

2. The dollar had to go down.

3. Interest rates had to go higher.

4. Oil trades with other commodities.

5. U.S. natural gas reserves were over-stated.

6. The price of gold had peaked.

7. The euro will fall apart.

8. Big pharma is dead.

9. Consumers are spending less.

10. The dogs of the Dow are the place to be.

Cramer said that all of these predictions were viewed as facts by the bears> Despite all of their attention in the media, however, U.S. markets finished strong, interest rated remained low, oil prices soared, natural gas reserves grew, big pharma out-performed and the dogs of the Dow continued their decline all year long, he said.

So as the new year dawns and hope springs eternal, Cramer reminded viewers that most of the bearish arguments they'll hear this year will also be false. Cramer told viewers that he is not totally bullish, he remains at DEFCON 2 regarding Europe and would still avoid the banks at all costs. But the high-yielding dividend stocks, he added, are still a great place to invest.

AT&T's Banner Year

Cramer kicked off the new year with a week-long series entitled the "Diamonds of the Dow," his top picks from the Dow Jones Industrial Average for 2012.

His first pick was in telco, as he compared AT&T ( T), a stock which he owns for his charitable trust, Action Alerts PLUS, to rival Verizon ( VZ).

For 2011, Verizon was the clear winner, advancing 12.1% versus AT&T with a scant 2.9% thanks to its failed merger attempt with T-Mobile. But in 2012, Cramer said he's betting on AT&T to play catch up, naming the company his first diamond for the year.

On a valuation basis, AT&T is more promising, said Cramer, trading at just 12.3 times earnings versus Verizon at 15.7 times earnings. The dividend edge also goes to AT&T, with a 5.7% yield versus 5% for Verizon. But the good news for AT&T, said Cramer, is that the T-Mobile fiasco is now over.

With the merger now out of the way, Cramer explained that AT&T can now focus its energies on building out its 4G network and adding to its spectrum through smaller acquisitions as it did late last year when it purchased spectrum from Qualcomm ( QCOM). Cramer also noted that many investors expected AT&T to lose out when Verizon began carrying the iPhone, but that simply hasn't happened.

Outside of wireless, Cramer said there's also lots to like about AT&T. For example, the company's legacy wireline business actually did well in 2011, as did its high-speed Internet and TV network Uverse, up 19%.

Taking into account all of these factors, Cramer said he expects AT&T to play catch-up in 2012, which is why it's his top Dow pick for the new year.

Stock Super Bowl Kickoff

In a new "Stock Super Bowl" series, Cramer pitted two of the top players in the S&P 500 against each other in a play-off match to see who will compete against the best player in the Nasdaq on Thursday. Tonight's contenders were Cabot Oil & Gas ( COG), which delivered a 100.5% return last year, against Intuitive Surgical ( ISRG), which returned 79.6%.

Cramer said on the surface in might seem difficult to compare a company that makes surgical robots with one that drills for oil and gas, but some stock metrics apply across all sectors, and one of those metrics is the PEG ratio, which compares a stocks P/E multiple with its growth rate. Cramer never advocates buying a stock with a PEG ratio over two, which is why in this round the edge went to Cabot, with a PEG ratio of just 0.9 vs. Intuitive with a PEG ratio of 1.7.

Cramer's next metric was takeover potential. He said that Intuitive is too large and rather specialized to be a big takeover candidate, but Cabot is ripe for the picking, especially given all of the merger activity in the oil and gas space.

Next up was what Cramer called "home-run" potential, the ability of a company to surprise investors with a big upside surprise. He said that while Intuitive does have some new product roll-outs coming, the advantage once again goes to Cabot, which has the potential to discover even more oil in its already prime oil shale acreage.

Cramer's final metric for the match-up was dividends. He said that while both companies pay a small dividend, the advantage goes to Intuitive, since its recurring cash have been directed towards shareholders, while Cabot's earnings almost already get sent for more and more drilling.

The final score for this play-off match up? Cramer said it's Intuitive Surgical with six and Cabot Oil & Gas with nine, making Cabot the clear winner.

Off the Charts

In this segment, Cramer went head to head with colleague Caroline Boroden over the chart of SPDR Gold Shares ( GLD), an ETF that was up 10% during 2011, but is now some 30 points off its highs.

According to Boroden, the daily chart of the GLD is worrisome, with the ETF hitting a hard ceiling of resistance and a wide spread of Fibonacci levels beneath the current levels. Boroden noted that 157.53 appears to be the level that the GLD would need to cross in order for her to be bullish.

The weekly chart of the GLD confirmed this theory for Boroden, who noted that this chart displays a zig-zag pattern which could indicate a bottom forming in the index. She also mentioned that the GLD appears to be moving in waves, making the Elliott Theory, which says stocks tend to move in five-wave patterns, also a possibility as the GLD is now completing the last of its fifth wave.

Turning to the fundamentals, Cramer said that every investor needs to own gold, both as insurance against uncertainty and also because the supply and demand for gold remains out of balance. He continued his support for owning the SPDR Gold Shares ETF.

Lightning Round

Cramer was bullish on SandRidge Energy ( SD), Alnylam Pharmaceuticals ( ALNY), JB Hunt Transport Services ( JBHT), Kinder Morgan Energy Partners ( KMP) and Allot Communications ( ALLT).

Cramer was bearish on Kinder Morgan ( KMI) and Research In Motion ( RIMM).

Beauty of Dividend Stocks

In his "No Huddle Offense" segment, Cramer answered the question, which sector will perform best in 2012? His answer, the dividend sector.

Cramer explained that dividends saved the day in 2011 and that trend will continue in 2012. Dividend stocks, while boring, proved to be the most secure and the most lucrative plays out there, said Cramer.

In today's market, he concluded, it pays to take less risk, not more, which is why stocks like Kinder Morgan Energy Partners ( KMP), Verizon ( VZ) and ConEd ( ED) continue to be among the best investments.

--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 AT&T.

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.

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