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NEW YORK ( TheStreet) -- Is the market's recent surge higher based solely on hope? Jim Cramer told his "Mad Money" TV show viewers Monday that he's not buying that explanation. Cramer said this rally is based on facts, which is why he no longer fears the future. Make no mistake, there are plenty of sectors that are relying on hope, said Cramer, but they're easy to distinguish from the good ones. Obviously, the international banks are trading on hope, he said, hope that the Europeans will finally save their economies. That's why Cramer said he's not a fan of these banks, other than J.P. Morgan Chase ( JPM), a stock he owns for his charitable trust,
Breaking Up Is Great to DoIn the real world, breaking up is a miserable experience, but in the stock world, it's a glorious occasion, Cramer reminded viewers, as he featured oil and gas giant Hess ( HES) to show just what could happen if this company decided to spin off some of its assets to unlock value.
Hess has long been viewed as a company with under-managed assets, which explains why its shares have been underperforming its peers. On July 25, management laid out plans for long-term restructuring by selling some non-core assets to fund increased drilling in select areas, but Cramer said that plan doesn't go far enough for shareholders. Cramer noted that on the exploration and production side of the business, Hess is seen as unfocused. That's why making even more asset sales could unlock tremendous value. He said the company's assets in the Bakken shale alone are worth $25 a share, while the company's Utica shale assets in Ohio aren't valued at all. Internationally, Hess' West Africa assets are worth $11 a share; Europe, $8, and Asia $17. Add up all those numbers and investors are already making 17% on their investments, said Cramer, and that's not even including the company's refining operation in New Jersey, nor its 1,300 filling stations along the east coast. Those assets could fetch another $2 billion, or $6 a share. Both Marathon Petroleum ( MRC) and Phillips 66 ( PSX) have both proven that refinery spinoffs work, said Cramer, as both of those stocks are near their 52-week highs. The same would be true with Hess, he said, if only management would keep an open mind.
An Eye for a Hot StockRetail has really been hot lately, Cramer told viewers, but only for those companies with the best eyes for style. That's why he features five fashionistas that have been getting it right and have more room to run. Cramer said one of the hottest initial public offerings of last year, Michael Kors ( KORS), is his first pick for this group. When the company last reported it delivered a 14-cent-a-share earnings beat on a 70% surge in revenues and a 24% pop in same store sales. More importantly, Kors gave upside guidance for the future. Next on the list, Gap ( GPS). Once considered the antithesis of fashion, Gap is now back on the catwalk with shares up 34% since Cramer first noticed the stock in May. He said there remains a lot of value both in the stock and its latest merchandise.
Also making the list, Nordstrom ( JWN), a seasoned retailer that's taking share by delivering a fabulous experience and a strong outlet business. Nordstrom delivered a strong 21% pop in revenues when it last reported. Another turnaround story, Urban Outfitters ( URBN), also made Cramer's short list of hot retailer. He said this company was once riddled with merchandise that customers simply didn't want, but now it's delivering an earnings beat of nine cents a share on an 11% rise in revenue and improving gross margins. Finally, there's Lululemon Athletica ( LULU), the yoga-inspired fashion sensation that's more of a technology company than a retailer. Cramer said Lulu's surprise 12% rise in earnings, along with a 15% pop in same store sales proves that this company should not be counted out.
Lightning RoundHere's what Cramer had to say about callers' stocks during the "Lightning Round": Newcastle Investment ( NCT): "I'm going with the crowd on this one. I like the yield, but I prefer Annaly Capital ( NLY)." Southwestern Energy ( SWN): "It's cheap, but that's not enough for me." BGC Partners ( BGCP): "This has been horrendous. It does have a great yield but it's not been a winner, it's been a loser." Ford Motor ( F): "The problem with Ford is not the U.S. The problems are in Latin America and Europe. Ford is a hold." Permian Basin Royalty Trust ( PBT): "A lot of these are cutting their yields. I'm staying away for now." Dendreon ( DNDN): "No, no, no, no. I reiterate that I don't like it. Cloudy future in a crowded place. " Amarin ( AMRN): "This one has had a big move. I'll bless it only as a speculative stock." Trinity Industries ( TRN): "Rail cars have been hot but I'm taking a pass. The stock has had a big move."
Wal-Mart ( WMT): "The last quarter wasn't that good. I want to wait to re-test $71 before pulling the trigger."