Cramer's 'Mad Money' Recap: Don't Build It and Profits Will Come

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NEW YORK ( TheStreet) -- "Don't build it and the profits will come," Jim Cramer told his " "Mad Money" TV show viewers Tuesday as he explored one of the driving forces behind the market's new highs -- the law of supply and demand.

Cramer explained that when demand is rising and supply is woefully behind the curve, that translates into higher prices and higher profits for the companies that are able to participate. That's exactly what's happening in the home market, he said. Our country simply isn't building enough homes to meet the growing demand. The result? Higher home prices across the country and rising profits for the home builders and for any company that makes things that go into a home.

But there are also shortages in other sectors, Cramer said, such as the hotel sector. There haven't been any major hotels built since the financial crisis began, and that means more profits for all those that are currently standing. There are also shortages in the airlines, where there's rising demand for new planes, and in the rental car space, where the after-effects of Hurricane Sandy still strain supply.

All of this translates into high stock prices, said Cramer, just as it has for the oil refiners. Our country hasn't seen a new refinery built in 40 years, he said, meanwhile the U.S. is now producing more oil and gas than it has in decades.

Cramer said this non-growth does come at a cost, however, and that's with jobs. He said hiring wont't pick up until things get so good that companies are forced to hire again and are forced to begin building those new autos and planes and new hotels. But until then, it's "all systems go" for just about every stock in the aforementioned sectors.

Off the Charts

In the "Off The Charts" segment, Cramer tapped into the analysis of colleague Dan Fitzpatrick to examine the chart of Diana Shipping ( DSX) to determine if the dry bulk shipping business really is back from the dead.

Using a weekly chart of Diana, Fitzpatrick noted the stock have been trending lower since 2008, using its 40-week moving average as its ceiling of resistance. That trend finally came to an end in July of last year, when the stock displayed a Doji reversal pattern of volatile trading. But then, on Jan. 2, Diana's stock finally crossed above the 40-week ceiling and immediately shot up 17% in a single week on strong volume.

Fitzpatrick used a daily chart of Diana to confirm the pattern, noting the Jan. 2 break out to the upside was also when the 50-day moving average crossed above the 200-day moving average, a move known as a bullish crossover. The stock's 50-day average is now its floor.

Cramer said he agrees with Fitzpatrick's analysis and feels that any pullback in Diana, like the one today, is a buyable dip, as the shipping industry is finally beginning to turn the corner. He said that once Diana breaks above its current ceiling, the stock could easily achiever $14 a share and he wants viewers to get in on that pop higher.

Balm in Gilead

In the 1990s, investors looking for growth would turn to Big Pharma, Cramer told viewers, but today, the growth is in biotech, which is why he highlighted Gilead Sciences ( GILD) the HIV and Hepatitis C powerhouse that's growing at 26% a year but trading at a scant 16 times earnings.

Cramer said that valuation makes Gilead cheaper than Bristol-Myers Squibb ( BMY), a stock Cramer owns for his charitable trust, Action Alerts PLUS. While Bristol-Myers may have a 3.5% dividend yield, shares of Gilead are up more than 51% since he last featured the company back on Sept 12.

Gilead is a leader in the Hepatitis C market, where some four million people suffer from the disease in the U.S. alone. The current treatment for Hep C consists of a 24-week treatment with grueling side effects that only offers a 50% to 60% cute rate. But Gilead's next-generation treatment promises to cut that duration to just 12 weeks and offer cure rates between 78% and 100%. Given that Hep C causes 13,000 deaths a year, Cramer said the market is anxiously awaiting Gilead's new drug, expected in mid-2014.

But beyond Hepatitis, Gilead is also leading in the HIV space, with its new four-in-one pill expected to generate $2.8 billion next year. In addition, Gilead also has a strong pipeline of products including additional HIV and even cancer treatments.

Cramer said that Gilead remains one of his favorite biotechs. Even with the stock's strong performance so far this year, he still feels it's a bargain given the company's promise.

Lightning Round

In the Lightning Round, Cramer was bullish on Anadarko Petroleum ( APC), ConocoPhillips ( COP), Annaly Capital ( NLY), Chimera Investment ( CIM), Movado Group ( MOV) and Tiffany & Co ( TIF).

Cramer was bearish on Banco Santander ( SAN), United States Natural Gas ( UNG), Nuance Communications ( NUAN)and American Capital Agency ( AGNC).

Executive Decision: Monty Bennett

In the "Executive Decision" segment, Cramer spoke with Monty Bennett, chairman and CEO of Ashford Hospitality Trust ( AHT), a hotel REIT that owns 122 properties across the U.S.

Bennett said there's a pricing discrepancy between where the public markets are valuing Ashford versus what the company's assets would be worth on the private market. He said his company's current multiple of 12 times earnings would be closer to 13 times earnings in the private market.

Bennett said that after being forced to cut its dividend during the financial crisis, Ashford is now very cautious about raising it. He said the company certainly can afford to raise the payout but has adopted a modest strategy for increases going forward.

When asked about the possibility of more acquisitions such as the company's Highland deal two years ago, Bennett explained there may be similar deals out there, but for now the company is adding capital to its current assets and building its earnings platform for the future.

Cramer said that hotels continue to be a strong place to be and Ashford is right in the middle of the action.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer opined on the insane battle over Dell ( DELL), saying the real winner will likely be the bidder who doesn't get the company.

Cramer said Dell has been in secular decline for years, with continually lower revenue, lower margins and lower earnings. Despite his best efforts, founder Michael Dell has done little to stem this tide, so why would taking the company private make any difference?

Cramer said it's highly unlikely the public markets have under valued Dell so far below what the private markets now seem to be willing to pay for the company.

That's why, by his estimation, Cramer said Dell continues to be worth just $10 a share.

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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 BMY.

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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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

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