Cramer's 'Mad Money' Recap: Making Sense of the Rally

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NEW YORK ( TheStreet) -- If you get too negative and give up, that's when lightning will strike, Jim Cramer told his "Mad Money" TV show viewers Thursday as he tried to make sense of the day's dramatic turnaround and rally. Cramer said when you least expect it, that's when the markets always move.

Things were looking ugly at 4 a.m., said Cramer, as he recounted his morning ritual. He said the news was riddled with talk of Greek defaults, Spanish bond auctions and weak earnings around the globe as a result. Even before the U.S. markets opened the futures pointed to a 40 point decline in the Dow Jones Industrial Average and Cramer said he was preparing for another really bad day.

But then, almost in an instant, European central banker Mario Draghi made comments that he was committed to saving Europe's ailing economies by any means necessary. Cramer said in the time it took him to get a cup of coffee, the futures were up 200 points, a full 240-point swing in just minutes.

Cramer said that caution still remains the watch word for these fickle markets. What Europe giveth it usually takes away a few days later, he reminded viewers. He said that Germany's Angela Merkel will likely pull the rug out from under the markets before the weekend's done, but until then investors should enjoy the gains.

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Michael Ward, chairman, president and CEO of CSX ( CSX), the railroad operator that delivered an earnings beat of two cents a share thanks to a strengthening U.S. economy.

Ward offered a candid look at the U.S. economy. He said utility coal shipments were down and down big, falling from 1.5 million carloads just a few years ago to just one million carloads this year. That wasn't unexpected however, Ward noted, the closing of older, dirty coal-fired power plants is just happening sooner than expected.

However, outside of coal, Ward painted a rosy picture, noting that auto shipments rose 27% and nearly 80% of CSX's other markets are stable to improving. Even in the lumbering forest products industry, which is closely tied to the housing markets, is showing slow but steady growth. Chemicals, natural gas and oil shipments are also rising.

Ward also touted CSX's new hub in Ohio as opening new markets for the company and providing customers with higher levels of service than ever before.

Cramer called CSX a cheap stock and one that's not yet done going higher.

Unlocking Value

In the second "Executive Decision" segment, Cramer spoke with Joe Almeida, chairman, president and CEO of Covidien ( COV), the biotech firm that's spinning off its lagging pharmaceuticals business to unlock the full value in its red-hot medical device segment. Covidien beat Wall Street estimates by 1 cent a share on a 2.8% rise in revenue.

Almeida said that Covidien is all about choices, which is why the company is focused on a portfolio of great products and allocates capital smartly to those products. He said Covidien's portfolio is balanced not just among products but also among geographies, with a focus on emerging markets.

Almeida credited Covidien's research and development efforts as allowing the company to enjoy organic growth year after year. He said his company invests heavily in research and is opening new R&D centers in India and China to exclusively help bring devices to those emerging markets.

As the battle over health care continues here in the U.S., Almeida told investors the vast majority of Covidien's products are life-saving devices and only a small fraction are elective procedures.

Cramer continued his support for Covidien given the company's good balance sheet, extensive research and development and great product portfolio. He said that when Europe knocks the markets down, stocks like Covidien are the ones investors should be buying on the cheap.

Lightning Round

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

Align Technology ( ALGN): "I happen to like the company very much. I want to stand buy it, it's terrific."

LG Display ( LPL): "I'm not going to Korea for stocks, I've got enough problems with U.S. stocks. If you want exposure to Apple ( AAPL), go buy Apple."

Kellogg ( K): "I think Kellogg is poorly run. Hershey Foods ( HSY) had a great quarter. Kellogg can't seem to do anything right. I say no until it yields 4.5%."

Select Comfort ( SCSS): "No, no. These mattress stocks are too hard. Don't buy is the best advice I can give you."

F5 Networks ( FFIV): "I was surprised at all the negativity. I'd rather see you in Salesforce.com ( CRM)."

Am I Diversified?

In the "Am I Diversified" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets.

The first portfolio included:

Apple, Caterpillar ( CAT), John Deere ( DE), Walt Disney ( DIS) and Monstanto ( MON).

Cramer identified two of a kind with John Deere and Monsanto. He recommended selling John Deere and adding a drug stock like Bristol-Myers Squibb ( BMY).

The second portfolio's top holdings included: AT&T ( T), Boeing ( BA), Merck ( MRK), Johnson Controls ( JCI) and Baker Hughes ( BHI).

Cramer said this portfolio was "well played" and properly diversified.

The third portfolio had: McDonald's ( MCD), Apple, Nike ( NKE), iShares Gold Trust ( IAU) and Yum Brands ( YUM) as its top five stocks.

Cramer said this portfolio shouldn't include both McDonald's and Yum Brands. He recommended selling Yum and adding a drug company with a good yield like Bristol Myers-Squibb.

The fourth portfolio's top stocks were: Walt Disney ( DIS), EMC ( EMC), Conoco-Phillips ( COP), Whole Foods Markets ( WFM) and Huntington Banshares ( HBAN).

Cramer also blessed this portfolio as properly diversified.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer opined on two stocks whose share prices crossed Thursday, one on the way up and the other on a death spiral down.

Cramer said Sprint Nextel ( S) was all but forgotten by Wall Street, but this $2 stock has made a number of smart moves and has clawed its way back to over $4 a share. He said the recent moves in Sprint will force analysts to take notice, which is why he expects shares to continue their march higher.

Shares of social gaming company Zynga ( ZNGA) however, remind us of everything that's wrong with the markets, said Cramer.

This overhyped Internet stock debuted at $15 a share and has been drowning investors in a manner not seen since the first dot com bust in 2001. Cramer said it was easy to see this one coming, which is why there's absolutely no excuse for the analysts which until today rated the stock as a "buy."

Cramer said it's almost impossible for companies to recover from a $2 share price, something both Nokia ( NOK) and Radio Shack ( RSH) can attest.

"Welcome to the graveyard, Zynga," Cramer concluded.

In Closing...

In his closing comments, Cramer said Facebook ( FB) delivered horrible numbers with decelerating revenue.

Starbucks ( SBUX) also delivered slowing sales, but Cramer said that doesn't mean the company is down and out forever.

Finally, Amazon.com ( AMZN) delivered a great quarter and remains his favorite out of the three companies.

--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 AAPL, BA, BMY, EMC, MCD and NKE.

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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