Cramer's 'Mad Money' Recap: The Winning Formula

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NEW YORK ( TheStreet) -- What makes for a winning stock in today's market? Jim Cramer told his "Mad Money" TV show viewers Tuesday that he's figured out the winning formula.

While the professional money managers are fretting over when the Federal Reserve will stop its bond buying and thus "take away the punch bowl" just as the market's rally is gaining steam, the Fed's "special sauce" is making bonds, bank CDs and Treasuries unpalatable, Cramer said. Thus, stocks with big yields including Clorox ( CLX), Kimberly-Clark ( KMB) and General Mills ( GIS) are getting a big boost.

Other household names are also part of the formula, said Cramer, with Procter & Gamble ( PG), Colgate ( CL) and Kellogg ( K) up big for the year.

Even the HMOs are joining the party, said Cramer, with Humana ( HUM) and UnitedHealth Group ( UNH) seeing strong rallies in today's trading.

Which stocks were not invited to the party? Cramer said materials companies in copper, coal and oil are not part of the mix, nor are tech stocks that rely on Europe and a return of the PC to prosper. Even Apple ( AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS, needs to sit this party out, he said.

In a nutshell, Cramer said if a company's got growth, a great yield or is mostly domestic, the Fed has sent it an invitation to the market's rally.

Executive Decision: David Steiner

In the "Executive Decision" segment, Cramer once again spoke with David Steiner, president and CEO of Waste Management ( WM), another Action Alerts PLUS holding, the country's largest disposal company and one with a 3.7% dividend yield and a $500 million stock buyback program.

Steiner explained that the boom in the housing market will become a boon for Waste Management because more home construction generates more waste and eventually those new homes become residential customers. That, in turn, drives commercial development further down the line, which also generates more customers for Waste Management. He said cleanup from Hurricane Sandy along the east coast will add to the bottom line.

When asked about the possibility of converting his company into a REIT, Steiner said his company is always looking for ways to make more money for its shareholders. He said while Waste Management will not be leading in this area, it continues to look at whether REITs or MLPs offer shareholders more advantages.

Turning to natural gas, Steiner said 90% to 95% of all new Waste Management trucks will run on natural gas, and the company is committed to using it wherever available. Along the same lines, Steiner noted that his company now generates more than five times the energy from methane at its landfills than the entire U.S. solar industry, which is a huge endorsement for U.S.-made and renewable energy.

Cramer said he continues to like the Waste Management story and the rally in this stock is likely still in its early stages.

Speculative Stocks, Long-Term Prospects

Continuing with his series on small, more speculative biotech companies, Cramer gave viewers a three-for-one special by recommending Vertex Pharmaceuticals ( VRTX), Sarepta Therapeutics ( SRPT) and NPS Pharmaceuticals ( NPSP), all three of which have excellent long-term prospects.

Cramer said Vertex is 11 points off its highs, but that doesn't make the company's cystic fibrosis treatments any less valuable. He said the company's main drug, which is only approved for a small subset of the 70,000 patients suffering from the disease, is already doing well, while its next-generation treatments are in phase III and phase II testing, with results expected soon.

Sarepta is working in the muscular dystrophy space and has already seen a 152% gain since Cramer first took notice of the company on Sept. 21. The company is filing for accelerated approval for its latest treatment, which not only stops degeneration but has actually helped patients improve. Cramer said the long-term prospects for Sarepta are excellent, even if accelerated approval is not granted.

Finally, there's NPS, a company whose CEO appeared on "Mad Money" just two weeks ago. Cramer said NPS' treatment for short bowel syndrome is a game-changer for those currently forced to endure daily hospital stays for 12 hours at a time.

Any of these orphan drug makers could hit it big, Cramer concluded, which is why at least one should be in every investor's portfolio.

Lightning Round

In the Lightning Round, Cramer was bullish on Iconix Brands ( ICON), US Airways Group ( LCC) and USG Corp ( USG).

Cramer was bearish on JetBlue Airways ( JBLU).

Executive Decision: Tom Farrell

In a second "Executive Decision" segment, Cramer spoke with Tom Farrell, chairman, president and CEO of Dominion Resources ( D), a company hoping to build an import/export terminal for liquified natural gas in Maryland and have it operational by 2017. Shares of Dominion are currently up 15% since Cramer last recommended it Dec. 6 and offer a 3.8% yield.

Farrell explained that Dominion already has much of the infrastructure for this project in place at its Maryland facility, including 15 billion cubic feet of natural gas storage, a super-tanker terminal and, most importantly, a pipeline that runs into the heart of the Marcellus and Utica shale regions of the country. The only missing piece, he said, is the equipment to liquify the gas, which will cost around $4 billion.

Farrell also said Dominion has signed both construction contracts to build the facility and has contracts in place to sell the gas once it's completed. When asked why the company chose to sign contracts before getting full regulatory approval, Farrell said he has full confidence the remaining permits will be granted in the coming months.

Asked whether America will lose its competitive advantage by exporting such a cheap and plentiful resource, Farrell said that in order for natural gas to truly succeed it will need a robust market, which includes some exports. He said it's highly unlikely that Dominion, or any other company, will have unfettered export abilities. But by having exports as part of the mix, drillers will always have a reason to keep drilling.

Cramer continued his support for Dominion and its bold initiatives.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said he's still not ready to sound the "all clear" on Apple, but the bottom may be beginning to form.

Cramer explained that stocks bottom much like they top out, with analyst after analyst changing their minds on the company and eventually creating a self-fulfilling prophecy. That's why today's downgrade by Goldman Sachs ( GS) matters, said Cramer -- not because the company had anything new to say, but it's just one more analyst that hates Apple.

When there's no one left to like it, said Cramer, only then will the bottom be at hand.

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To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

-- 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 AAPL, GS and WM.

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."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

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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