Cramer's 'Mad Money' Recap: Don't Fight the Fed

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NEW YORK ( TheStreet) -- Don't fight the Federal Reserve.

That was Jim Cramer's lesson for his "Mad Money" TV show viewers Monday. He told investors that sometimes the macroeconomic picture matters more than the results of individual stocks.

Cramer said today's market's rally was a classic lesson in the tug-of-war between the microeconomic "realists," who analyze the results of individual companies, versus the macroeconomic "impressionists," who look at the world in a more abstract manner.

Sometimes the realists are in charge, noted Cramer, but other times, like today, the abstract data such as industrial gains in China or a positive manufacturing number here at home are all that's needed for a healthy rally.

That's why Cramer said he learned a long time ago to never fight the Fed. If the central bank is working hard to spur manufacturing or strengthen the banks, eventually it will succeed, and the last place an investor wants to be is on the wrong side of that trade. The banks, oils, copper, aluminum and materials stocks are all on the Fed's radar, said Cramer, and those are the stocks that were lifted most by Monday's macro news.

There is no right or wrong when it comes to whether the micro or macro picture matters more over the long term, Cramer concluded, but at least for today the abstract macro picture was the one to which the markets paid more attention.

New Quarter, New Ideas

In football, quarterbacks are known to flow through a process known as the "check down," where they scan all of their receivers looking for the best opportunities to pass the ball.

Now that the third quarter is behind us, Cramer said he's doing his own check down to see where the best investing opportunities are.

Starting off in the Dow, Cramer said Home Depot ( HD), a stock he owns for his charitable trust, Action Alerts PLUS , was one of the best performers, up 14% last quarter, but that story is no longer new. Procter & Gamble ( PG) was also up big last quarter, but that stock needs a pullback to be investable.

In the losing column, there's Intel ( INTC), down 15% in the third quarter, but there's no bull case to be made with that stock or with Hewlett-Packard ( HPQ), another Dow laggard.

Over on the S&P 500, Cramer said there are lots of hot stocks including Sprint Nextel ( S) and Tesoro ( TSO), but those stocks also need big pullbacks to be investable. Monster Beverage ( MNST) is intriguing, he said, but energy drinks are a tricky category.

That's why Cramer chose next to look for sectors that have been left behind, particularly the transports. He immediately said no to the airlines and the trucking companies after FedEx ( FDX) gave such poor guidance, which left him with the rails, a sector that doesn't compete with itself, doesn't have European exposure and was been hit hard by falling coal demand.

Cramer said he chose Union Pacific ( UNP) as his favorite rail, as it transports the cheaper coal that does well as natural gas prices rise. He said utilities need to restock their coal, which is good news for Union Pacific, and most of the west agricultural demand is already priced into the stock.

Cramer said that investors don't always have the pass the ball, they can choose to keep it in cash instead, but hopefully this "check down" sheds some light on how to find some new ideas for the new quarter.

A Bouncing Reborn Yahoo!

Cramer offered a heartfelt congratulations to Yahoo! ( YHOO) CEO Marissa Mayer on the birth of her baby boy this week and also on the rebirth of her other baby, Yahoo!. He said this ailing Internet giant is now finally worth buying again.

After years of a flatlined stock price and a revolving door in the CEO suite, Cramer said Mayer may finally be the one to unlock the tremendous value that's hidden inside the company. He said Mayer's choice for CFO, Ken Goldman of Fortinet ( FTNT) proves that Mayer is serious about returning value to shareholders.

So what's the real value hidden inside Yahoo!? Cramer said the company's remaining stake in the Chinese Alibaba is worth at least $5.8 billion, while its Yahoo Japan assets can add on another $4.77 billion. Add that total to the $5.84 per share of cash the company has on hand and Yahoo! is already valued at $14.84 a share, leaving its core U.S. businesses, including mail, sports, finance, Flickr and more, valued at just $1 per share.

Cramer said that Yahoo!'s core business is worth at least $7.17 a share, taking the total value up to $22 a share. He said with Mayer at the helm, it's easy to think the stock will begin to move once the company reports on Oct. 22 and outlines more of its plans.

Companies cannot execute a turnaround plan, or any plan, without a solid CEO, Cramer concluded, and Yahoo! finally has one.

Lightning Round

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

Frontier Communications ( FTR): "No. I don't want you to touch this one. They're in a bad part of telco."

Western Digital ( WDC): "Very inexpensive but I don't want to own any drive stocks."

Cabot Oil & Gas ( COG): "People feel that natural gas has bottomed. I'd hold onto it."

Deckers Outdoor ( DECK): "This is a one-way ticket away from paradise. We need to hear from management before we can believe in Deckers again."

Celgene ( CELG): "I like it. I think they're doing a terrific job. I want to buy some right here."

Devon Energy ( DVN): "This is a distinct disappointment and I'm not going there."

Sears Holdings ( SHLD): "Until you tell me that you want to shop at Sears, I'm not buying it. I won't shop there and I don't want to own the stock."

ArcelorMittal ( MT): "Just sell it. I don't want any steel stocks right now."

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Hamid Moghadam, chairman and co-CEO of Prologis ( PLD), a global logistics REIT that specializes in warehouse and distribution buildings. Prologis sports a 3.25% dividend yield and has seen its shares rise 21% so far this year.

Moghadam said that Prologis now operates in 21 countries and, overall, the world outside of Europe is faring pretty well. He said that even some areas of Europe are recovering, with only southern Europe having "a long way to go." Moghadam noted that after a four-year span with virtually no new construction, markets are finally in balance.

That's why Prologis plans on $1.5 billion in new development this year, a number that Moghadam said represents "quite a few new buildings." His company is the most dominant player in the industrial building space with its next largest competitor being five times smaller.

When asked about his company's valuation, Moghadam said that his goal is to achieve 30% leverage, down from the current 42% level. He said that net asset value for Prologis is about $35 to $38 a share, but given the company's size it should have a premium valuation. Moghadam also noted that industrial rents are 25% below their 200 peaks, leaving lots of room for growth.

Cramer agreed, saying that Prologis is a real grower with a great dividend yield.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said he'd be a buyer of B&G Foods' ( BGS) coming secondary 3.65 million-share offering of stock.

Cramer said he remains a fan of B&G, the company that buys and revitalizes neglected food brands including Cream of Wheat and Ortega Mexican foods, among dozens of others.

He said B&G's winning strategy of using its credit lines to make the acquisitions, then following with the equity offerings to reduce debt, has made shareholders money time and time again. Shares are up from a low of $2 to over $31 a share now.

--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.

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