Cramer's 'Mad Money' Recap: An Irrational Stock Market

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NEW YORK ( TheStreet) -- There are exceptions to every rule, Jim Cramer told his "Mad Money" TV show viewers Wednesday. When it comes to the stock market, everything is most definitely not rational.

Cramer said the industrial stocks continue to soar despite having nothing new to say. Meanwhile, Johnson & Johnson ( JNJ) saw its shares barely dinged despite cutting estimates.

In the tech sector, investors continue to pile into stocks like Amazon.com ( AMZN) and LinkedIn ( LNKD), two stocks that don't seem to be constrained by traditional metrics, said Cramer.

And then there's Apple ( AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS . Apple's in-line results were seen as a disappointment, said Cramer, sending its shares down 8% in after-hours trading.

Despite having $137 billion in cash and pretty good earnings, the markets were focused on gross margins, which came in below consensus at 38.6%. The number of iPhones sold was also a tad below what Wall Street was expecting. Are sellers just taking profits or are they worn down by the stocks' total lack of momentum?

Cramer said it doesn't matter what the reason, but investors need to remove the emotions from Apple and realize that it's just another stock, one that will likely deliver decent, but not spectacular, earnings from here on out. Apple has a ton of potential, he said, but under Tim Cook we have yet to see any blockbuster new products that don't cannibalize existing ones.

"Don't let this one stock blind you to the other opportunities the market is offering," Cramer concluded.

Know Your IPO

In the "Know Your IPO" segment, Cramer highlighted Zoetis, the animal health division of Pfizer ( PFE), which is expected to offer 86.1 million shares next week between $22 and $25 a share.

Cramer said that Zoeits plays into the $22 billion animal health market, in which it currently has a 19% share. The new company makes everything from vaccines to feed additives and will derive 65% of its revenue from livestock and the remaining 35% from horses and household pets.

Cramer noted that unlike the human health-care market, most animal patient bills are paid out of pocket. When it comes to drugs and vaccines, there is far less generic competition. Given the stock's expected valuation and growth rate of 6%, Cramer said he expects Zoetis to have 20% upside from its IPO.

So should investors sell Pfizer to buy Zoetis? Cramer said absolutely not! Pfizer will retain 80% of Zoetis after the IPO and will be using the proceeds to reward shareholders with a sizable stock buyback. In addition, the split companies will both receive higher market valuations as individual companies are easier for analysts to value.

Cramer said he would get in on the Zoetis IPO if possible, but noted that existing Pfizer shareholders will also do quite well in 2013.

Riding the Rails

There's a bull market roaring on America's rails, Cramer told viewers, but that doesn't mean investors should jump into just any rail stock. He said while railroad operators CSX ( CSX) and Norfolk Southern ( NSC) have all posted terrific results, it's the rail car makers that represent the most value.

Specifically, the demand for tanker cars has been red-hot as the American energy renaissance has created the need for thousands of new tankers. Other industries need them, too, to move everything from chemicals to corn syrup.

The railroad business is highly cyclical, Cramer warned, which means that if the economy falters, this group will be hit hard. But if America continues to recover, then the rail car makers is the place to be.

Of the four major players, Cramer said that American Railcar ( ARII) is his favorite, as the company gets 20% of sales from tankers and it offers a 2.8% dividend. Next on the list would be Trinity Industries ( TRN), which also gets 20% of revenue from tankers. Unlike American, Trinity has exposure to other industries such as barges and windmills, which makes it more risky.

Cramer said he'd avoid FreightCar America ( RAIL) because that car maker has a lot of exposure to the weak coal market. He is also not a fan of Greenbriar ( GBX).

Lightning Round

In the Lightning Round, Cramer was bullish on EOG Resources ( EOG), Westar Energy ( WR), Morgan Stanley ( MS), Duke Energy ( DUK), Masco ( MAS), Healthcare Trust of America ( HTA) and Travelers Companies ( TRV).

Cramer was bearish on Isis Pharmaceuticals ( ISIS), Nuance Communications ( NUAN) and Genworth Financial ( GNW).

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: Armour Residential ( ARR), LinnCo ( LNCO), Nordic American Tanker ( NAT), Banco Santander ( SAN) and Vodaphone ( VOD).

Cramer said this portfolio was "perfection" when it comes to diversification.

The second portfolio's top holdings included: Ford ( F), Dana Holding ( DAN), Smith & Wesson ( SWHC), Alcoa ( AA) and KeyCorp ( KEY).

Cramer advised selling Dana and adding a drug company to properly diversify this portfolio.

The third portfolio had: Chicago Bridge & Iron ( CBI), Eaton ( ETN), HollyFrontier ( HFC), Penske Automotive ( PAG) and Westport Innovations ( WPRT) as its top five stocks.

Cramer said he'd allow Westport and Penske in the same portfolio assuming Westport is considered a speculative stock.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer highlighted a handful of terrific earnings reports. He said that DuPont ( DD), an Action Alerts PLUS holding, was like a "C" student delivering a solid "B" on the final exam. Meanwhile, Travelers delivered a fantastic quarter that no one saw coming.

Then there's IBM ( IBM), another Action Alerts PLUS name. Cramer said this company continues to make a ton of money with 90% margins in software.

Finally, there's Google ( GOOG), a company that blindsided investors last quarter, but redeemed itself this one with both earnings and a solid strategy for growth and profitability.

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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 a position in AAPL, DD, IBM, ETN and KEY.

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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