Cramer's 'Mad Money' Recap: A Slumbering Market

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NEW YORK ( TheStreet) -- The markets are just taking a nap, Jim Cramer told his "Mad Money" viewers Tuesday, and when they awaken from their slumber, they'll be heading higher.

Cramer said the markets have seen several of these rest periods, which typically come after big rallies like the one we saw after the first of the year. After each of them the markets have continued higher, he added.

That's why the markets were able to digest a host of bad news, including downgrades of American Express ( AXP), Biogen Idec ( BIIB), Regeneron ( REGN) and United Continental ( UAL), said Cramer, along with estimates cuts for Apple ( AAPL) and disappointing results from Lululemon Athletica ( LULU). Despite all of this bad news, a late-day rally still ensued.

Even the threat of another Congressional battle over the debt ceiling, complete with the threat of a default, government shutdown, debt downgrade or all of the above, was not enough to keep the markets down, said Cramer, because in the end, business is simply good enough to sustain the rally.

Cramer said he can't blame the analysts for jumping off the bull and getting cautious with countless estimate cuts and downgrades. After all, that's exactly what they did during all of the previous market naps as well. But as history has proven, those were the times to buy, not sell, because once the markets woke up they continued higher.

Picking Up the Pieces

Breaking up may be easy to do, but what should investors do with the pieces?

Cramer pondered that question with Abbott Laboratories ( ABT), a company that spun off its pharmaceutical division on Jan. 1 as Abbvie ( ABBV), a stock with a 4.7% yield, while the remaining Abbott Labs currently yields 1.7%.

Cramer first recommended Abbott, a company he owns in his charitable trust, Action Alerts PLUS , in November 2011, right after the breakup was announced. Since then, shares have risen by 24% -- raising the question of what investors should now do with the two companies they own.

Cramer said Abbott Labs, the medical products company, has 14 segments, including nutritional products, which is growing at 35% a year. The company has a lot of exposure to emerging markets, including India and China, which could account for as much as 50% of sales over the next three years.

Cramer said while the old Abbott traded at 12 times earnings with a 9% growth rate, the new Abbott is trading as 17 times earnings with growth expected in the low teens. This multiple expansion, along with solid management and conservative guidance makes Abbott Labs a buy, said Cramer.

So what about Abbvie? Cramer said he was not as impressed. Abbvie does have good management and a decent portfolio of drugs, he noted, but the company's main product, Humira, goes off-patent in 2017 -- something that investors will begin to take into consideration soon.

He said this will be huge for the company as investors don't yet know if Abbvie has enough in its pipeline to make up for the coming Humira losses. At its present valuation, Cramer noted Abbvie trades for 11 times earnings, about on par with Pfizer ( PFE), which has a solid track record and a known pipeline of new drugs. Cramer advised selling shares of Abbvie.

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Carly Garner over the future price of natural gas.

Cramer said that, typically, natural gas sees a decline in late-January right before rallying between February through April. But with such a glut of natural gas in our country, is the seasonal cycle now broken? The number of natural gas rigs fell by 46% in 2012, but is that enough to stabilize prices?

According to Garner's research, the answer is most likely "no," as the price of natural gas has been trading in a wedge pattern since its lows in April 2009. Natural gas currently has a ceiling of $3.70 and a floor of $3.20 with both the RSI, relative strength indicator, and the WPR, or Williams percent range, pointing towards more selling to come.

Garner expects that if natural gas falls below $3.20, the commodity could see $2.60 or even $2.15 if emotions begin to trump the fundamentals.

Cramer said he agreed with the technicals that, at least in the short term, the price of natural gas could be in trouble. He said that given demand and supply levels, the February rally will likely remain intact, but investors shouldn't consider buying in quite yet ahead of that expected rally.

He added that while low prices are bad for natural gas producers, investors must always keep in mind that low prices are great for utilities and those that use gas, like the chemical companies.

Lightning Round

In the Lightning Round, Cramer was bullish on American Capital Agency ( AGNC), Prospect Capital ( PSEC), Kelly Services ( KELYA), Express Scripts ( ESRX) and CVS Caremark ( CVS).

Cramer was bearish on Caterpillar ( CAT) and FirstEnergy ( FE).

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Randy Foutch, chairman and CEO of Laredo Petroleum ( LPI), an independent oil and gas producer that's expected to grow its oil production by 25% this year. Laredo came public in December 2011 and is trading only slightly above its initial IPO price.

Foutch said the new horizontal drilling technologies have fundamentally changed the energy business in America. He said that we've always known that shale formations were in areas like the Permian basin because previously they've had trouble trying to drill past them. But now, he said, wells came be drilled horizontally into these formations and stimulated to produce more oil than the "easy" oil that laid beneath them.

Foutch said Laredo purchased its first land rights in 2008 in an area where only one well stood. Today, he said, there are 35 to 40 wells in that area and all are performing very well.

When asked about the company's expansion plans, Foutch said Laredo remains very disciplined. He said the company has many options for financing its growth including joint ventures, public financing and the debt markets, which means it is not capital constrained, but the company is still taking a slow and sustainable path towards expansion.

Finally, when asked about where he sees the price of natural gas in the future, Foutch said the industry is finally able to bring enough supply to meet just about any demand, so he expects prices to increase but not as fast, nor as volatile, as they have in the past.

Cramer said he's a fan of Laredo as the oil and gas revolution marches on.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer pondered the question of whether to buy or not to buy Dell ( DELL). His conclusion? It all depends on price.

Cramer said that $15 is the most a deal to take the company private could achieve, leaving little upside for anyone who bought into the stock now. But if there is no deal, shares could easily fall back to $11 a share as there's little earnings momentum without a deal.

Cramer's advice: Sell the stock at current levels and buy it back at $10 if a deal falls through.

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

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

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At the time of publication, Cramer's Action Alerts PLUS had positions in AAPL, ABT.

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