Cramer's 'Mad Money' Recap: Opportunities Abound (Final)

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NEW YORK ( TheStreet) -- Europe may keep pressing down the stocks of great U.S. companies, Jim Cramer told his "Mad Money" TV show viewers Monday, but that just creates a great opportunity to buy.

Cramer used today's weakness to once again educate viewers on the mechanics of the stock market and what really makes stocks rise and fall. He explained that today's markets are primarily driven by large money managers and hedge funds, funds that are so big they simply can't invest in many small to mid-cap stocks without practically buying the entire company. So what do these gigantic funds invest in? They invest in the market as a whole, said Cramer, using instruments like the S&P 500 futures.

Cramer said the advent of futures trading has changed the dynamics of the markets, as many funds now look toward Europe in the mornings and place their bets on the U.S. markets based on how Europe is about to close for the day. That means if Europe is having a bad, the U.S. is likely to follow.

But that trend also creates opportunities, said Cramer, opportunities like Ross Stores ( ROST), a discount retailer that has exactly zero exposure to Europe, but still saw its shares slide over $1 a share simply because it was part of the S&P 500.

Cramer said stocks like Ross, along with many regional banks, are excellent buys on days when the markets are taking no prisoners. He advised viewers to buy in stages, buying additional shares if the markets continue sinking. Cramer was also bullish on growth stocks like Lululemon Athletica ( LULU), Celgene ( CELG) and Chipotle Mexican Grill ( CMG).

Executive Decision

In the "Executive Decision" segment, Cramer once again spoke with Sandy Cutler, chairman and CEO of Eaton ( ETN), a stock he owns for his charitable trust, Action Alerts PLUS. Shares of Eaton are up 9% for the year and yield 3.2%.

Cutler painted a mixed picture for Eaton, saying that while the company still expects sales to be up 7% for the year, with profits up 14%, they see challenges in many overseas markets. Cutler called out Europe in particular, noting that forecasts for a third-quarter recovery in Europe are now expected in the fourth quarter.

Cutler was also bearish on the Chinese recovery, as loosening credit and lower interests rates have yet to spark renewed growth. Brazil also remains a weak spot for Eaton, noted Cutler, with sales expected to be down 10% for the year.

Turning to the U.S., however, Cutler was more bullish, saying that the company's largest division, electrical systems in the Americas, is seeing continued growth and recovery in the construction markets. Cutler predicted a multiple-year expansion in U.S. construction.

Despite weakness overseas, Cramer remained bullish on Eaton as the company still expects to see a record year on the strength of the U.S.

Wal-Mart Whacked

Should investors buy the 4.6% dip in shares of Wal-Mart ( WMT) after it was discovered that the company bribed officials in Mexico? Cramer said in a competitive and uncertain market, absolutely not. In fact, Cramer said investors should use any bounce in Wal-Mart shares to sell the world's largest retailer and not look back.

Looking at the scandal through the eyes of an investor, Cramer said the fines Wal-Mart will likely endure as a result of these allegations will be minimal and likely not even material to the company's earnings. But there's a bigger issue at play, said Cramer, and investors cannot look at just the earnings in a vacuum.

Cramer said what matters most in this scandal are what the prosecutors at the Justice Department and SEC are thinking. It is an election year after all, Cramer reminded viewers, which means the desire to make an example of Wal-Mart is far higher than normal.

But regardless of how vigorously the executives are pursued, Cramer said the simple fact remains that it is difficult to run a company when your top executives are being investigated. Cramer said that Wal-Mart's board of directors and audit committee may have no choice but to jettison those involved, including the company's CEO, which would also create a lot of confusion for the company.

Cramer said that even without the Mexican scandal, Wal-Mart is not a loved company on Wall Street. There are far better retailers out there, he said, and investors should consider investing in those stocks long before they consider gambling on what could become years of uncertainty and distraction. "Wal-Mart share could go a lot lower," Cramer concluded.

Tumi & Splunk

"Resist the temptation of seductive IPOs," Cramer told viewers as he highlighted two recent IPOs that are now too hot to handle. He said that investors need to steer clear of high-end luggage maker Tumi ( TUMI) and big data software provider Splunk ( SPLK) after both companies came public last week.

Cramer said that Splunk shares took off like a rocket last week, soaring 109% on their first day of trading. The company is in a terrific market, big data, and has a fabulous management team and stellar 35% revenue growth. But none of that matters, reminded Cramer, if the price of the stock is wrong.

The problem with Splunk, said Cramer, is that the company has no earnings and isn't forecast to have any until 2014. That leaves shares of Splunk trading at an insane 20 times sales, which Cramer said bluntly "is insanely expensive." As a comparison, cloud computing giant Salesforce.com ( CRM) trades at just nine times sales, but that company is established and also very profitable.

Then there's Tumi, which saw its shares pop 47% on their first day of trading. Cramer called this stock "downright dangerous." Tumi does have a terrific brand and smart people running the company, he explained, but at 35 times earnings, the company is simply not growing fast enough to warrant its newfound valuation. Shares of Lululemon Athletica ( LULU) and Michael Kors ( KORS) are both trading a high valuations, Cramer noted, but also have the growth to justify their share prices.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer made the pitch for yield, dividend yield that is, calling it insurance for your portfolio.

Cramer said that no one would buy a home without insurance and that's taking into account all of the safeguards that are in place to prevent a fire or flood, like strict building codes and smoke detectors. Yet many investors are willing to load up their portfolios with sexy, high-growth stocks that may get hammered on the international news of the day.

Cramer said that stocks like Verizon ( VZ) and Duke Energy ( DUK) both have zero exposure to Europe and China, yet they offer investors excellent protection against market selloffs like today.

Lightning Round

In the Lightning Round, Cramer was bullish on Pengrowth Energy ( PGH) and Verizon ( VZ).

Cramer was bearish on Hess ( HES), FARO Technologies ( FARO), AT&T ( T), Gannett ( GCI) and Sprint Nextel ( S).

--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's Action Alerts PLUS was long ETN.

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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