Cramer's 'Mad Money' Recap: Don't Panic, Look for Discounted Stocks

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NEW YORK ( TheStreet) -- Don't be paralyzed by fear, Jim Cramer told his "Mad Money" TV show viewers Thursday as he explored the root cause of something that has professional money managers "freaking out."

There's been a huge surge of buyers for the 10-year Treasury bond recently, he explained, and that has money managers and fixed income professionals running scared. Why? Cramer said it's because increased bond buying traditionally means two things, both of them bearish for stocks.

First, the increased bond buying means the demand for money is weaker than expected, something that's already confirmed by record low mortgage rates and commercial loan volume. People simply aren't borrowing money, he said, and in the minds of money managers that signals trouble ahead, which means sell stocks.

Second, bond managers fear a spike in bond prices could signal another pending economic disaster because the same pattern emerged in 2008 right before Lehman Brothers failed.

Cramer thinks this bond buying just doesn't make sense because the U.S. government is horribly in debt and there are clearly far better places to put one's money than in Treasurys. Instead of panicking, Cramer suggested using the professionals' confusion to seek out great stocks trading at a discount.

Cramer recommended high-yielding dividend stocks including Honeywell ( HON), 3M ( MMM) and United Technologies ( UTX), three companies that while having some European exposure, are still solid bets thanks to their high yields and great management.

"Stop and think, which stocks are worth more as bond yields head lower" and buy those names on the cheap, Cramer concluded.

When Breakups Are Great

Corporate breakups are great places to be, Cramer reminded viewers, as two recent spinoffs, Post Holdings ( POST) and Beam ( BEAM) have proven. That's why Cramer went bullish on another breakup story, McGraw-Hill ( MHP).

McGraw-Hill has announced plans to split itself into two companies by year's end, a financial ratings company and an educationally-focused publisher -- think textbooks. In so doing, the McGraw will make itself more appealing to Wall Street, said Cramer, as it unlocks value for shareholders.

Cramer said the problem with McGraw-Hill today is one of valuation. How do you value a fast-growing financial ratings agency and a slower-growing textbook publisher when they're part of the same entity? By splitting up the businesses, the Standard & Poor's ratings business can easily be compared to rival Moody's ( MCO), while the publishing arm can be compared to that of Pearson ( PSO).

Looking into each of the parts separately, Cramer said there's lots to like. The company's publishing arm is set to benefit from new textbook standards coming in 2014, plus McGraw-Hill also has a partnership with Apple ( AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS, to publish digital books on the iPad.

On the ratings side of the business, McGraw-Hill is also set to prosper because countless companies will be taking advantage of record low interest rates to issue new debt, all of which will need a Standard & Poor's credit rating.

Cramer said the sum of McGraw-Hill's parts could be worth 34% more than where the combined shares trade today, plus the company also has an aggressive stock-buyback program in place that's removing 12% of the total float in the interim.

Who's Right on Wynn?

When Wall Street analysts fight, investors win. Those were Cramer's thoughts regarding Wynn Resorts ( WYNN), the casino operator that received a Goldman Sachs ( GS) upgrade on Tuesday, the day before a J.P. Morgan Chase ( JPM) price target cut.

Goldman likes Wynn's prospects in the longer term. With shares off 40% from their highs, the firm felt that most of the negatives are already baked into Wynn's stock. Additionally, the Goldman analyst cited positives for the company such as its new property under construction in the hottest portion of China's Macau province, as well as its limited competition in the region and its 2% dividend yield.

J.P. Morgan, however, trimmed its price target for Wynn from $160 a share to just $134 citing a steady decline in high rollers, who account for nearly 40% of the company's earnings. Despite China's economy still being in flux, J.P. Morgan felt the high-roller trend could continue.

Cramer said he has confidence in Wynn's management and is intrigued by its valuation of just 14 times earnings with a 14% growth rate. He called the company's long-term prospects fabulous. However, in this turbulent market, Cramer concluded that Wynn is the right stock but at the wrong time.

Cramer said there's no reason to own Wynn now with its new casino still years away. He said it's better to wait for additional clarity on both the company's business and the Chinese economy overall.

Lightning Round

P/> Here's what Cramer had to say about caller's stocks during the "Lightning Round":

MetroPCS Communications ( PCS): "I think it's time to move on. I'd rather own some Sprint Nextel ( S) bonds."

Chimera Investment ( CIM): "I want you to own Annaly Capital ( NLY). I feel much better about that."

Realty Income ( O): "I think that's a great domestic call with great growth prospects."

Office Depot ( ODP): "I think you need to stay away. It's not even a lottery ticket. Home Depot ( HD) is the depot that you want."

Brocade Communications ( BRCD): "I still don't like the stock, or the segment either."

Virgin Media ( VMED): "Why do you need that craziness? I like Verizon ( VZ) because I like to sleep at night."

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Gregg Engles, chairman and CEO of Dean Foods ( DF), one of the best-performing stocks in the Standard & Poor's 500 over the past month. Shares of Dean are up 9.3% since Cramer last recommended it last Monday.

Engles said all of the challenges facing his company over the past two years have finally reversed themselves, with milk prices now falling along with resin and fuel costs. He said Dean is also seeing top-line growth thanks to its expansion into plant-based products.

Engles pointed to Dean's Silk brand of soy and other plant-based products as being a real driver for the company. He said while regular milk is a commodity, soy milk is a value-added product that's lower in calories and healthier as well. Plant-based products have accounted for just 15% of profits for Dean just a few years ago, but in the company's most recent quarter they accounted for 31%.

When asked about the overall economic environment, Engles noted that during the recession many supermarkets heavily discounted gallons of milk to drive foot traffic, something that crimped demand. However, today, he noted, Dean is seeing robust demand at healthier margins.

Finally, when asked whether it makes sense to spin off the company's Dannon yogurt brand along with a few other products, Engles said his company does realize the value in separating its low-growth, low-margin business from its higher-growth, higher-margin businesses. He fell short of suggesting that Dean is actively looking into a breakup.

Cramer said he's still a fan of Dean Foods, although shares have run up a lot recently, so investors should wait for a pullback.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer compared the U.S. financial and political systems to those of ailing Europe.

Cramer said that while the U.S. is far from perfect, it does have a central bank that instills confidence and has the tools to combat inflation and deflation when needed. He said that even at our worst, the U.S. never sees rioting in the streets.

In Europe, however, there really are no rules, and Cramer said opinions abound on every issue, so much so that nothing ever gets done. Europe's central banks instill no confidence, he said, and thus no one knows what's going on. Reckless lending continues, failed banks continue to survive and the European Central Bank can't even roll back its own interest rate hikes from just last year.

Yes, the U.S. isn't perfect, Cramer concluded, but it's far better than the class warfare that's erupting overseas.

--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 had positions in AAPL, JPM and BRCM.

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."

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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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