Cramer's 'Mad Money' Recap: Finding Opportunity in a Declining Stock

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NEW YORK ( TheStreet) -- Not all stock sales are created equal, Jim Cramer told "Mad Money" viewers Thursday.

He compared the selling off in two names, railroad Norfolk Southern ( NSC) and home-goods retailer Bed Bath & Beyond ( BBBY). Cramer said that while both of these stocks fell over $6 a share today, it's the job of every good investor to determine if the declines are a buying opportunity or a precursor of bad things to come.

In the case of Norfolk Southern, the company pre-announced that it would miss earnings and miss big. The culprit, a sizable drop off in demand for coal. Cramer said the bulls argue that once cold weather returns, the demand for coal will rebound, but he feels otherwise.

The reality of the situation is President Obama doesn't support dirty coal as a fuel for baseline power generation in our country, Cramer said. With natural gas cleaner and now cheaper, it's likely there won't be any new coal plants built, putting coal into secular decline.

But in the case of Bed Bath & Beyond, the issue is declining same-store sales, which fell from 5% growth to just 3%. Cramer said this retailer should be doing well with housing on the mend. But with a pullback in growth and an ugly chart, many investors are shying away from the company.

So which company can be bought? Cramer said that with coal in secular decline, Norfolk Southern will be a train wreck, pardon the pun, for many years to come. Bed Bath and Beyond, however, has shrewd management that's faced this situation before and prevailed, making today's decline a buying opportunity for smart investors.

Getting in on the Action

Investors should always be looking for great long-term stories, Cramer told viewers as he featured Five Below ( FIVE), the teen-oriented discount retailer where everything in the store is less than $5.

Cramer told investors to get in on the Five Below initial public offering back on July 19. Shares came public at $17 a share and since then have doubled, rising 101%. Even if investors weren't able to get in on the IPO, shares are still up a handsome 31% thus far.

Five Below is by no means an inexpensive stock, noted Cramer, as it now trades for 50 times earnings with a 35% growth rate. But the company does have a proven concept and only 226 locations with the opportunity to expand to over 2,000.

Cramer said by comparison, Dollar General ( DG) has 10,000 stores, while Dollar Tree ( DLTR) has 4,300. Using the current valuations for those stocks, Five Below should be worth $4 billion to $5 billion, whereas its current market cap is less than $2 billion.

Cramer cautioned investors not to chase shares of Five Below higher, as the stock has exhibited the peculiar pattern of falling sharply when it reports earnings. He said that as with many momentum stocks, there will be plenty of opportunities to pick up shares on the cheap later on.

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Patrick Doyle, president and CEO of Domino's Pizza ( DPZ), a stock that's come under fire recently as shares have seemingly stalled, up just 4% for the year.

Doyle said Domino's remains an international growth story as the company is now slightly bigger outside the U.S. than it is inside the U.S. He said Domino's will be celebrating its 10,000th location in Istanbul, Turkey, later this week, making it only the eighth restaurant chain in the world to achieve that milestone.

Doyle said restaurants need to have an international story in order to thrive in today's market, and Domino's has a proven that their concept works and they have a lot of room to grow. He noted that Domino's only has 100 locations in India, a country with over one billion people, and those locations continue to grow in the double digits.

Other hot spots for Domino's include Turkey, where the company has 250 stores, and France, a country, Doyle noted, that "eats a lot more pizza than people think." He noted that Domino's continues to represent a good value, which helps it thrive even in weaker economies.

Doyle closed by saying Domino's is always looking for ways to reward shareholders through additional dividends and stock buybacks. Cramer said while the stock may be stalled, Domino's is still a great story.

Lightning Round

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

Exxon Mobil ( XOM): "No one ever got hurt owning it. I like Chevron ( CVX), Exxon is just OK in my book."

Diageo ( DEO): "These are terrific stocks. They are the best."

Leap Wireless ( LEAP): "Look before you leap. I think you should buy Sprint Nextel ( S)."

Duke Energy ( DUK): "I'm a buyer of Duke, even though I don't like their boardroom manners."

Gannett ( GCI): "I'd like it to come in a little. They're money."

Hovnanian Enterprises ( HOV): "No, I'd rather see you in Weyerhaeuser ( WY)."

ConocoPhillips ( COP): "It's OK. Chevron is cheaper and has more growth."

Tenaris ( TS): "It's not bad but you can get Schlumberger ( SLB) for a discount. I'm going there."

Sirius XM Radio ( SIRI): "The bears are putting a cap on that stock, but I'm a believer."

Treacherous Technology

It used to be that fall was the time to buy all things tech, Cramer told viewers, but in today's market technology is more treacherous than ever, as a recent downgrade of the entire semiconductor equipment sector further illustrated. But are there any bright spots worth owning?

Cramer said even with new product cycles from Intel ( INTC) and Microsoft ( MSFT), the PC market has gone from fast growth to slow growth to no growth to declines. He said that Apple ( AAPL), a stock he owns for his charitable trust, Action Alerts PLUS , remains the only player in that cohort.

The rest of the PC makers and suppliers remain value traps, said Cramer, including AMD ( AMD), Micron ( MU), Nvidia ( NVDA) and Xilinx ( XLNX). He said only Broadcom ( BRCM) and Qualcomm ( QCOM) have any upside potential.

In the big data space, Cramer said he likes EMC ( EMC), but wouldn't extend that logic to include servers or disk drive makers. He remained bullish on Google ( GOOG) and said that consulting plays like IBM ( IBM) are also strong.

Finally, Cramer said that Facebook ( FB) might be worth owning as the company may be getting its act together after seeing its shares falter for so long.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer spoke about his earlier interview with Starbucks ( SBUX) CEO Howard Schultz. He said that investors want to be betting with, not against, Schultz, who is setting up his company for a third round of growth.

Cramer was less optimistic on Green Mountain Coffee Roasters ( GMCR), currently a Starbucks partner but also a company that will eventually become the competition as Starbucks unleashes its new Verismo coffee maker to the public.

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

To email Scott about 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, BRCM, CVX, IBM, SLB and WY.

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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