Cramer's 'Mad Money' Recap: Picking the Right Stocks

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NEW YORK ( TheStreet) -- The world's economies won't wreak havoc on your portfolio if you have the right stocks, Jim Cramer told his "Mad Money" TV show viewers Wednesday as he sounded off against the so-called "top-down" approach to investing.

Cramer said that according to the macro-economic thinkers, all stocks are tied to their respective economies. So if the economies are accelerating, stocks will, too. But if they're decelerating, stocks will also follow suit.

There's just one problem, however -- things just don't work that way.

Cramer called the top-down approach "lazy thinking" because, in reality, the correlation just isn't there, especially if investors are picking the right stocks. He said with the interest rates in U.S. Treasuries expected to remain near zero for at least the next two or three years, stocks with dividends north of 3%, 4% and even 5% are the only place to be. Plus, with only 10% of mutual funds currently beating the S&P 500, investors will see a voracious appetite for stocks as money managers race to catch up.

Cramer once again railed against the notion that individual investors are better off simply investing in index funds rather than picking their own stocks. He said if investors do their homework, they can choose a small portfolio of stocks that will easily beat the averages and most mutual funds as well.

To illustrate his point, Cramer went through a list of his top holdings for charitable trust, Action Alerts PLUS .

He said that CVS Caremark ( CVS) remains his top holding as the company continues to pick up business from Express Scripts ( ESRX). His second-largest holding, Apple ( AAPL), has the ability to grow in spite of economic weakness.

Also making the list is J.P. Morgan Chase ( JPM), a bank that's making money on mortgages here in the U.S. while its losses in Europe continue to wane. Boeing ( BA) is another holding as the seven-year aerospace cycle is just now gaining steam. Finally, Schlumberger ( SLB) is a play on the rising price of oil.

Cramer said these are just a few stocks that can transcend the macro economies and reward shareholders for years to come.

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Paul Palmieri, co-founder, president and CEO of Millennial Media ( MM), an advertising company at the forefront of the Internet's migration to mobile devices.

Palmieri said consumers' transition from desktop to mobile is not necessarily a problem for companies like Millennial that are uniquely mobile. He said that, overall, click-thru rates on mobile ads are higher than their desktop counterparts and advertisers are willing to pay more for them.

Among the differences between desktop and mobile, however, are that on mobile users are likely to begin a transaction from within an app, rather than via a search box. Thus companies like Yelp ( YELP) are able to deliver very precise ads within their own vertical. Since mobile only serves one ad per page, compared to 15 or 16 on a desktop browser, those mobile ads are far more effective.

When asked about Apple's new iPhone, Palmieri said he's excited for a few reasons. First, he said the larger screen means ads can get taller and will be easier to read and click on. Second, 4G speeds mean richer ads with more animations and video. Finally, Apple's Passbook app allows advertisers to "close the loop" and see exactly how many sales are coming from their mobile ad efforts.

Cramer said Millennial remains at the forefront of a great business and he continues to like the stock.

Looking for a Cure

Investors need companies in their portfolios that can transcend politics, Cramer told viewers, and that means companies like those trying to develop treatments for Hepatitis C, the leading cause of liver disease in the U.S. and one that affects over 170 million people worldwide. Cramer said that Hep-C is a $20 billion market opportunity, which is why there are many biotech companies chasing it.

But a lot has happened in the Hep-C race over the past few months, so Cramer laid out the latest news. He said that Bristol-Myers Squibb ( BMY), an Action Alerts PLUS holding, was clearly the leader in the space. But after a patient in its clinical trials had a heart attack, its program was halted and later discontinued. Cramer said Bristol-Myers remains a great growth stock with a terrific yield, but it's no longer a player when it comes to Hep-C.

Other players like Abbott Labs ( ABT), Merck ( MRK) and Johnson & Johnson ( JNJ) are also in the Hep-C race, but those companies are too huge for a single new drug to move the needle.

Another player is Vertex Pharmaceuticals ( VRTX), but that company's drug is too early in development to be a major player at the moment.

That leaves Gilead Sciences ( GILD), said Cramer, a company that's trading at just 13.5 times earnings with a 16% growth rate. Gilead's drug, currently known as the catchy GS-7977, is in the same family as Bristol-Myers' drug, only without the side effects. The treatment is a 12-week oral regiment, compared to a 24-week injection routine, and the cure rates are, so far, markedly higher.

Cramer said Gilead is a lot more than just GS-7977. however. The company also leads the way in HIV treatments and has a host of other promising drugs in the pipeline.

Lightning Round

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

Cabot Oil & Gas ( COG): "I'd rather wait for a pullback. I say hold off and wait."

Advanced Micro Devices ( AMD): "Why? I have nothing to say about those guys. I don't want to touch it."

International Business Machines ( IBM): "I say take some profits in IBM and let the rest run."

Frontier Communications ( FTR): "The business fell off. They were too confident in their business and I don't like the stock because of that."

Main Street Capital ( MAIN): "This one is on fire. I think the stock is a good one."

Ecopetrol SA ( EC): "That's a pretty good, well-run company. I think it's better than Total SA ( TOT)."

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: Coca-Cola ( KO), McDonald's ( MCD), Amazon.com ( AMZN), Apple ( AAPL) and Kraft Foods ( KFT).

Cramer said this portfolio was properly diversified.

The second portfolio's top holdings included: WellPoint ( WLP), McDonald's ( MCD), MGIC Investment ( MTG), Joy Global ( JOY) and Excelon ( EXC).

Cramer said he was also bullish on this portfolio's diversification.

The third portfolio had: Public Storage ( PSA), Monsanto ( MON), Wal-Mart ( WMT), Verizon ( VZ) and Bank of America ( BAC) as its top five stocks.

Cramer said "bingo," as this portfolio was also diversified.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer once again pleaded the case for energy self-sufficiency in North America. He said if Washington would only mention that it supports the use of natural gas as a surface fuel and perhaps prompt the U.S. Postal Service to begin using natural gas for its fleet, that would be all it takes for the dream to become a reality.

How can companies like Chesapeake Energy ( CHK) announce Wednesday that it's selling $6.9 billion worth of assets and still increase its production? Because there's simply so much oil and gas right here in America.

With violence once again erupting in the Middle East, it's imperative the U.S. get serious about energy independence, said Cramer, and natural gas would make that happen -- not to mention that it's cleaner and cheaper than diesel fuel.

Stop Trading Apple

In his closing comment, Cramer once again told investors to stop trying to trade Apple and simply invest in it for the long term.

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

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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, CVS, IBM, JPM, MCD and SLB.

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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