Cramer's 'Mad Money' Recap: A Rally Based on Facts

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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, Action Alerts PLUS .

Cramer said the industrials are hopeful the Chinese economy will recover, which is why stocks like Freeport McMoRan ( FCX), Caterpillar ( CAT) and 3M ( MMM) trade higher on every bit of bad news. Surely the Chinese will have to do something eventually, won't they?

Other sectors, like the natural gas stocks and even the transports, like FedEx ( FDX), are also hopeful that the world's economies will begin to gain steam.

However, there are plenty of sectors moving on cold, hard facts, like the fact that bank CDs and bonds pay next to nothing -- which makes the likes of Verizon ( VZ), Kraft ( KFT) and Home Depot ( HD), with their bountiful dividend yields, very attractive.

Retail is also on fire, said Cramer, just look at Costco ( COST) or Target ( TGT) or PVH Corp ( PVH). Housing is also strong, which we see in Owens Corning ( OC), Stanley Black & Decker ( SWK) and Toll Brothers ( TOL).

Even in tech there is growth, noted Cramer, although it all resides with Apple ( AAPL), another Action Alerts PLUS name, along with Google ( GOOG) and ( AMZN).

Cramer said any of these names is a good place to invest.

Breaking Up Is Great to Do

In 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 Stock

Retail 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 Round

Here'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."

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Nick Schorsch, chairman of American Realty Capital Trust ( ARCT), a stock that's seen a 14% gain since Cramer last spoke with Schorsch on July 12, but also one that's come under fire after the company announced it was selling itself to Realty Income ( O).

Schorsch said the merger was a perfect example of one plus one equaling three, as Realty Income is a great company with a terrific balance sheet. He said the combined company will be able to boost dividends by 7% and Realty Income has a track record of raising their dividend 67 times in a row.

Additionally, Schorsch said American Realty shareholders get to tap into Realty Income's higher multiple, making the deal accretive for everyone. The combined company will be more stable, he said, as well as having a much better cost of capital for the future.

Cramer said that normally he advises shareholders to sell on a takeover, but in this case he's advising investors to stick with the company and get shares in the new entity.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer sounded off against Alcoa ( AA) and Bank of America ( BAC), the two biggest laggards over the past two years.

Cramer said while he could argue that both companies are better now than they were two years ago, it simply doesn't matter. Alcoa, he said, is suffering from an aluminum glut that has no end in sight while Bank of America is competing against Wells Fargo ( WFC) and losing at every turn.

With no catalysts in sight for either company, Cramer said he prefers Wells Fargo and Vale ( VALE), both of which are Action Alerts PLUS holdings.

And in Closing...

In his closing comments, Cramer said earnings at Palo Alto Networks ( PANW) were disappointing, but he liked the quarter at dollar store chain Five Below ( FIVE).

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

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

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, JPM, VALE and WFC.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for, Inc., and CNBC, and a director and co-founder of All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of 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, 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 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, 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, 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 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, 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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