Cramer's 'Mad Money' Recap: The Urge to Merge

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NEW YORK ( TheStreet) -- Investors are still fighting the tape, Jim Cramer told "Mad Money" viewers Tuesday, but that's not stopping just about every sector from housing and health care to retail and the rails from rallying and rallying big.

Perhaps more interesting than the market rally is what's going on behind the scenes, he said -- the urge to merge has kicked into high gear.

Cramer said while stocks are up big from their 2008 lows, they are still far cheaper than they were in 2007, which is making them more and more attractive to companies looking to grow on the cheap.

He said news that OfficeMax ( OMX) and Office Depot ( ODP) are looking to merge shouldn't come as a surprise, as that's exactly what's needed to compete with Staples ( SPLS) and Costco ( COST).

Then there's Heinz ( HNZ), a company that's been increasing earnings and expanding internationally for years. Yet, the analysts remained negative on the stock, said Cramer, which makes it no surprise that Warren Buffett became interested in buying the company.

Dell ( DELL) is no different, said Cramer, nor is Virgin Media ( VMED), or Copano Energy ( CPNO) or Acme Packet ( APKT). In all of these cases, companies and their CEOs are betting big that weakness in the present will grow into big profits in the future.

Confidence has returned to the markets, Cramer concluded, so rather than fighting the tide, why not jump in and join them?

Off the Charts

In the "Off The Charts" segment, Cramer went head to head with colleague Tim Collins over the chart of SPDR Gold Shares ( GLD) to see if the precious metal should remain in your portfolio after what has been a difficult few months for gold.

According to Collins, the nearly five-year bullish trend for gold ended in October, when the rally lost its mojo. He noted that investors continue with their "buy the dips" strategy, but since October, every dip has only yielded another leg lower. Gold could see a 3% to 4% bounce in the short term, said Collins, but he would not be a buying of that rally.

The weekly chart of the SPDR Gold Shares also confirmed this analysis because Collins noted a failed cup-and-handle formation, which is a bearish indicator. Collins felt GLD would remain rangebound between $150 and $175 a share, giving investors no reason to be long or short the commodity.

Cramer said while he continues to think gold should remain a part of every portfolio, he agreed with Collins that there's no reason to add to a position, and it makes sense to remain cautious on gold. He said the SPDR Gold Shares ETF has held up far better than any of the gold mining stocks, which is why he continues to recommend that ETF over any other gold investment.

Making Money After the Breakup

Breaking up may be easy for companies to do, Cramer reminded viewers, but the real money seems to be made after the breakup has occurred. That's certainly been the case with Tyco International ( TYC), he noted. The company's spinoffs of Covidian ( COV), TE Connectivity ( TEL) and most recently ADT ( ADT) have been off to the races.

ADT came public in October 2012, said Cramer, and since then has risen 30%, a move that he's caught for his charitable trust, Action Alerts PLUS. But with the housing recovery powering ever higher, is the move in ADT over? Not by a long shot.

ADT currently has 6.5 million customers for its safety and security services that include everything from fire and carbon monoxide monitoring to home and business security products. A full 90% of the company's revenue are recurring and ADT enjoys 25% market share, making it the largest provider in its markets.

Cramer said ADT would make an excellent takeover for a larger company, but even without a takeover the company is still attractive because it's expanding its services and always offers the best products and pricing around. ADT is paying down debt and returning cash to shareholders with a 1% dividend yield and a stock buyback program that was recently accelerated by management.

Cramer noted that while ADT has already run up big, given the company's potential for growth this is one name that's just getting started.

Lightning Round

In the Lightning Round, Cramer was bullish on Trulia ( TRLA), Realogy Holdings ( RLGY), Banco Bilbao Vizcaya Argentaria ( BBVA), Green Mountain Coffee Roasters ( GMCR), Annaly Capital ( NLY), Cisco Systems ( CSCO) and American Tower ( AMT).

Cramer was bearish on Banco Latinoamericano ( BLX) and Imax ( IMAX).

Executive Decision

In the "Executive Decision" segment, Cramer spoke with Nick Akins, president and CEO of American Electric Power ( AEP), a utility at the heart of North America's oil and natural gas renaissance, but also one that's transforming itself to an environment where coal is no longer king.

Akins said that during 2012, American Electric Power was focused on transition and removing risk from its business. As the economy stabilizes in 2013, his company is now poised for growth and prosperity. American Electric offers a 4.1% dividend yield and Akins said he's confident that yield will only go higher as the company continues to grow.

Akins said that with so much growth in the Eagle Ford and Utica shale regions of the country, American Electric will be well-positioned for future growth and its customers will also benefit from the transition away from coal towards cleaner-burning natural gas. The company will also continue to invest another $4 billion to $5 billion into retrofitting and cleaning its coal-fired facilities as well, dramatically lowering emissions.

Cramer said American Electric Power is a utility that's doing a lot of things right, which is why it should be a part of investors' portfolios.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer told viewers not to be squeamish about buying a stock on weakness.

Take Google ( GOOG), a stock that everyone wants to be in as it powers over $800 a share, said Cramer.

But where were all those investors back in October when the stock fell $60 a share on a weak quarter? Google didn't have many believers back then, he recalled, despite the company continuing to deliver a ton of growth and profit potential.

Google was able to turn itself around since October, Cramer concluded, but only those with the guts to buy on the pullback were able to truly profit from the move.

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-- 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

At the time of publication, Cramer's Action Alerts PLUS had a position in ADT and CSCO.

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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