Cramer's 'Mad Money' Recap: Next Week's Game Plan

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NEW YORK ( TheStreet) -- Everyone is expecting lousy earnings next week, Jim Cramer told "Mad Money" viewers Friday, and when the bar is set low, even mediocre news can send stocks higher.

That's why Cramer said his game plan will be paying attention to a few key earnings reports.

Cramer said on Monday he'll be watching the German industrial production numbers as well as any news out of China over the weekend. In a "less is more" scenario, Cramer said he wants to see bad news from Germany, which will force them to play ball with the rest of Europe, but good news from China.

Tuesday brings earnings from Alcoa ( AA) and Yum Brands ( YUM), two stocks very closely levered to the health of the Chinese economy. Cramer said Alcoa will likely be hurt by Chinese aluminum production, but he likes Yum Brands in the low $60s.

Then on Wednesday, Costco ( COST) will be reporting. Cramer said that owning expensive stocks in this environment is risky, which is why anyone still owning Costco is being greedy. Also on Wednesday, a FedEx ( FDX) analyst meeting. Cramer said with the bar set low, any positive numbers could send that stock higher.

For Thursday, it's grocery chain Safeway ( SWY) that's due to report. Cramer said Safeway remains "a falling knife" and he much prefers Whole Foods ( WFM). He was also bullish on trucking company JB Hunt ( JBHT), a stock that could send the transports higher as its not exposed to Asia, nor does it ship crops or coal.

Finally on Friday, it's Wells Fargo ( WFC) and JPMorgan Chase ( JPM), two stocks he owns for his charitable trust, Action Alerts PLUS , taking center stage. Cramer said Wells Fargo could gallop higher on any positive news, but he's not expecting anything astonishing from JPMorgan.

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Nolan Watson, president and CEO of Sandstorm Gold ( SAND), a company that helps finance gold mining operations in return for a percentage of the gold produced at that mine.

Watson said that unlike a traditional bank, Sandstorm is 100% equity financed, which means it can take on risk over longer periods of time. He said miners actually prefer to work with Sandstorm versus offering equity themselves, since many mining executives own shares themselves and don't like dilution.

Watson said Sandstorm has just a $1 billion market cap, compared to the $10 billion valuation of Franco-Nevada ( FNV) and $14 billion for Silver Wheaton ( SLW). That means that many smaller deals are ignored by the bigger guys, leaving plenty of room for Sandstorm to grow.

When asked how the company makes money, Watson explained that in return for financing, Sandstorm gets to purchase gold at just $400 an ounce and has additional contracts that ensure the company doesn't lose money no matter how low the price of gold may go. Given Sandstorm's strong cash flow, Watson said his company will become a dividend payer once its current stage of growth is complete.

Finally, when asked how high the price of gold could go, Watson said he easily sees $2,000 an ounce as a possibility in the near future. Cramer said like Franco-Nevada, Sandstorm remains a terrific investment in a choppy market.

Speculation Friday

For "Speculation Friday," Cramer returned to one of his favorite themes: orphan drugs.

He said when it comes to betting on biotech, nothing is more lucrative than an orphan drug that receives government protections and can charge big premiums for the patients they serve. That's why he once again recommended Vertex Pharmaceuticals ( VRTX), a stock that's seen a 73% gain since Cramer recommended it two years ago.

Cramer said Vertex' new drug, VX-809, is currently in phase II testing to treat cystic fibrosis. The company published bullish data back in May, news that sent the stock up $20 in a single day. But about a month afterwards, Vertex was forced to admit it misinterpreted some of its data, news that slowed its progress and cooled its share price.

Vertex is set to announce the final phase II data Thursday, and Cramer said he expects the former troubles will finally be put to rest. Given VX-809 could fetch as much as $200,000 per year per patient, Cramer said peak sales could be $6 billion for Vertex. Given similar valuations, the company's stock could be worth double or more.

Cramer advised getting into Vertex ahead of Thursday's conference. Investors wishing to do more homework don't have to hurry, though, as VX-809 won't hit the market for at least a year.

Lightning Round

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

Skechers USA ( SKX): "I want to sell, sell, sell. I don't want Skechers and I don't want Deckers Outdoor ( DECK)."

Abbott Laboratories ( ABT): "You can't buy it here. You need to let it pull back. You're paying too much up here."

Cypress Semiconductor ( CY): "It yields more than 4% but I see no reason to own it. They're not an Apple ( AAPL) supplier, so I can't own it."

CBS ( CBS): "That's an annuity business and that's where I want to be. "

Aircastle ( AYR): "I'm a sell, sell, seller. That business is not for me."

Vector Group ( VGR): "I like it. I like the yield. My favorite is Philip Morris International ( PM)."

Homework and Mad Mail

In his "Homework" segment, Cramer followed up on a few stocks that stumped him during earlier shows. He said that Generac Holdings ( GNRC), the market leader in home generators, is a terrific buy trading at just 11 times earnings with a 12.6% growth rate.

Cramer was less bearish on 3D Systems ( DDD), however, saying that while the company's products are cool, increased competition no accelerating earnings means investors need to stay on the sidelines.

He was also not a fan of Gordman Stores ( GMAN), an apparel and home decor retailer that should be doing well in this environment, but one that lowered its outlook on declining same store sales.

In the "Mad Mail" viewer feedback segment, Cramer told a viewer he's not guessing when it comes to Guess ( GES). He'd rather stick with what's working in retail and that's Michael Kors ( KORS).

Finally, when asked about Buffalo Wild Wings ( BWLD), Cramer said that it's better late than never to invest in this terrific restaurant chain.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer sounded off against the critics who accused him of politically spinning today's Labor Department numbers showing unemployment falling below 8% for the first time since 2009.

Cramer said that not everything is political, and the latest data should have no drama associated with them. Yes, the Romney campaign would have liked the number to stay above 8%, but it's impossible to validate these numbers, so why bother?

Cramer said if it were up to him, he'd outsource the calculation of these statistics to companies such as SAP ( SAP) or Tibco ( TIBX), which could do a far more accurate job, be transparent and offer updates on a weekly basis.

But given the system that we have, you simply have to take it at face value.

--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 positions in APPL, JPM and WFC.

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