Cramer's 'Mad Money' Recap: Pay Attention and Prosper

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NEW YORK ( TheStreet) -- The markets are as "dumb as plywood," Jim Cramer told "Mad Money" viewers Tuesday.

But that's a good thing, because it means that anyone paying attention can profit from it.

Case in point: A 271-word press release from truck engine maker Cummins ( CMI), which, just after 1 p.m. ET Tuesday, single-handedly took down the entire Dow Jones Industrial Average.

Cramer said the press release starts out simple enough, with yet another dividend boost from this best-in-show company. But then things turn ugly when the release announced lowered full-year revenue guidance from up 10% to just in line with 2011 levels.

Cramer said for a growth stock like Cummins, the lowering of revenue forecasts is a death blow. It signals that the world is either slowing or the company's best days are behind it. In the case of Cummins, the company continues to innovate and take market share from rivals like Navistar ( NAV), so it's clearly not a company in decline -- which means that yes, the world's economies are indeed slowing more than forecast.

But was the Cummins news really news? Could investors have seen it coming and avoided Tuesday's, and likely Wednesday's, losses? Cramer said they could have if they were listening to the Alcoa ( AA) conference call Monday night.

He said on that call, the aluminum maker told investors that demand was slowing more than forecast. It practically wrote the Cummins press release 12 hours in advance.

Cramer said opportunities like today's can easily be spotted if investors have their eyes open and are paying attention. There will be dozens of companies reporting in the coming weeks that will forecast the fates of countless others. Pay attention and prosper, said Cramer.

Off The Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Scott Redler over the chart of Facebook ( FB), the IPO disaster from two months ago that might finally be worth owning.

Redler used a chart of Facebook's first three days of trading to illustrate how supply vastly overwhelmed demand for the hotly-anticipated initial public offering.

First, after opening at $42 a share and popping to $45 within the first 15 minutes of trading, Facebook failed to hold that level, its first bearish signal.

Second, shares closed near its lows on its first day, its second strike. Finally, shares continued to sink on weak volume during day two, the nail in the coffin for the bulls.

Using Facebook's full daily chart since its IPO, however, Redler noted a "cup and handle" pattern, which is a bullish signal noting excess demand may finally be exhausted. Redler felt that shares are now a buy between $30.50 and $32.50 and he expects strength to continue to an additional seven to eight points of upside.

Cramer, however, remains bearish on Facebook, saying it's too dangerous to own before the company reports earnings on July 26. Too many questions remain about the Facebook's business, he said, and only the earnings call can answer them.

And the Winner Is...

The results are in and "Mad Money" viewers have voted Arena Pharmaceuticals ( ARNA) as their pick for the biggest winner in the second half of 2012. Cramer said Arena received 67.1% of the vote in his "Home Run Derby" Monday night, but he's still skeptical.

Cramer said that when it comes to biotech companies, he looks for small, undiscovered names -- the exact opposite of Arena, which took center stage when its weight loss drug Belviq received U.S. Food and Drug Administration approval earlier this year. While the markets are expecting Belviq to be a $1 billion to 3 billion opportunity for the company, it may not be able to live up to the hype.

What could go wrong? Well, for starters Belviq its not the panacea for obesity. The drug only produces an average 5% to 6% weigh loss in patients after 12 weeks. If the drug cannot be taken in higher dosages without serious side effects and if it fails to produce results in 12 weeks, patients must discontinue its use. There's also the issue of whether HMOs will cover Belviq. One is already on record as saying it won't pay.

Making matters worse, Arena only receives a 40% cut of the revenue from Belviq as its partnered with other companies for its development. At Arena's current valuation that pegs Belviq as a $6 billion opportunity, far greater than forecast. There's also competition to consider as Vivus ( VVUS) may receive approval for its weight loss drug, Qnexa, as early as next week and that drug may come to market before Belviq.

All things considered, Cramer said that Arena has a risk-reward that's too dicey. He prefers Onyx Pharmaceuticals ( ONXX), another of his five candidates from Monday's show. He said Onyx's blood cancer drug is also awaiting FDA approval and would be the company's second drug on the market.

Lightning Round

Here's what Cramer had to say about callers' stocks during the "Lightning Round":

Tractor Supply ( TSCO): "I am not sure that this climate is right for them. I say stay on hold."

Honeywell ( HON): "I like Honeywell. I prefer to buy it on weakness."

Walt Disney ( DIS): "Disney is firing on all cylinders. As it comes down, you want to pull the trigger and buy."

Goodrich ( GR): "It's done. Ring the register and sell, sell, sell."

Select Comfort ( SCSS): "Select Comfort is not the king and that industry worries me."

Lululemon Athletica ( LULU): "I still like Lulu. I'm not giving up on Lulu."

Chipotle Mexican Grill ( CMG): "This is a great growth stock that you need to buy on the way down in a horrible market. I'll include Starbucks ( SBUX) and Celgene ( CELG)."

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Jeff Bradley, CEO of Globe Specialty Metals ( GSM), a high-quality producer of silicon-based specialty metals. Shares of Globe are just off their 52-week lows but sales were up 5% in the company's most recent quarter.

Bradley explained that silicon metal is used in everything from shampoo to car tires and iPads. He said the product is made from a blend of quartz, a special type of coal that's only found in two places on Earth and wood chips. Once completed, silicon metal is used all over the world for aluminum castings, semiconductors and even solar panels.

Bradley said that while Globe is a cyclical company, it's also a unique one as its the lowest-cost producer of silicon metal and it owns all of its raw materials, including the mines and wood chipping operations. He said that Globe has made money every quarter, even the worst of economic environments.

Adding to Globe's uniqueness -- the fact that all of the company's end markets are growing while the global supply of silicon metal is remaining the same.

Cramer said Globe tells a compelling story and doesn't deserve to trade alongside other, ailing cyclical companies. In this case, he concluded, "perception matters more than reality."

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said he's still reluctant to call a bottom in natural gas. While it's true that drillers are slowing production and moving assets into finding oil, and both the U.S. and Canada are progressing with plans to export natural gas to the rest of world, that's still not enough to move the needle.

Even the shuttering of coal-fired power plants in favor of natural gas and the push to make more trucks and locomotives that use natural gas is not enough.

Cramer said that what the natural gas industry needs, and has needed, is a push from Washington. Neither presidential candidate has this clean, abundant fuel even on their radar screens. That's why we haven't seen a bottom in the price of natural gas, something the natural gas stocks have been signaling for weeks.

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

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

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To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

At the time of publication, Cramer's Action Alerts PLUS had a position in DIS.

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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