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

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.


NEW YORK ( TheStreet) -- The markets are at a surreal moment, Jim Cramer admitted to his "Mad Money" TV show viewers Monday, one where even the optimists are confounded by how bullish things have become.

Cramer said as he reviewed last week's charts, he found three disturbing patterns that are likely confounding money managers around the globe.

The first pattern: Stocks that run up ahead of their earnings and then run even higher after they report. Case in point: Whole Foods Markets ( WFM), a stock that had been stuck in the low $80s for weeks, but then 10 days ahead of its earnings broke out above $90. Cramer said typically in a case like that, profit takers would come in and there would be a pull back before the run would resume. But not so with Whole Foods, which continued to rally still higher on the news, sending share up an additional $10.

That same trend was seen in both Walt Disney ( DIS) and Domino's Pizza ( DPZ).

Then there's the curious pattern of stocks that gap higher but don't retreat to "fill in the gap" before continuing higher. Cramer said this is a very typical bullish pattern, one of great news followed by brief consolidation then a continued move higher. But that pattern wasn't seen with Williams-Sonoma ( WSM) or Restoration Hardware ( RH), said Cramer, as both those stocks jumped higher and continued higher with not even a blink of consolidation.

Finally, Cramer said he's seeing a pattern of stocks that offer dismal earnings or gloomy outlooks, the kind that would normally send shares lower but the markets are sending higher as well. Examples include 3M ( MMM), Caterpillar ( CAT) and Emerson ( EMR). Cramer noted that after gloomy outlooks from all three companies, these stocks were all rewarded with higher stock prices.

Cramer said despite all these rampant bullish signals the markets are still not getting any respect, even though respect is clearly its middle name.

Room to Run

Investing is all about putting together bits of information to form a solid thesis, Cramer told viewers. That's why when Charles River Labs ( CRL) said two weeks ago that Big Pharma is spending less on early-stage research and more on late-stage clinical trials, investors should have been able to piece that information together with last week's IPO of Quintiles Transformational Holdings ( Q), a company that specializes in, you guessed it, late-stage research.

Cramer said after a modest 7% run since its IPO, Quintiles is one stock with a lot of room to run. The company is known as a contract research organization, which means they specialize in assisting drug makers in getting the mountains of data they need to prove their compounds are both safe and effective.

What makes Quintiles so exciting is it's trusted by the Food and Drug Administration and has both the size and scale needed to both provide excellent research as well as stifle its smaller competition. That's why Quintiles has been a part of 85% of all central nervous system research and 76% of all oncology research over the past few years.

Quintiles plays right into the hands of drug companies focusing on Phase II and Phase III testing, said Cramer, yet the stock still trades for less than its peers. Given a comparable multiple, Quintiles should be a $50 stock, or 16% higher, but the company deserves more than that given its superior growth rate.

Executive Decision: Matt Ouimet

In the "Executive Decision" segment, Cramer sat down with Matt Ouimet, president and CEO of Cedar Fair Entertainment ( FUN), the theme park operator that's seen its shares ride by 173%, including reinvested dividends, since Cramer first got behind the stock in August 2011.

Ouimet said Cedar Fair's success starts with providing value for its guests, and that's why his company is able to offer a 6% yield plus growth for its shareholders. He said the amusement park business wasn't always a good one, but Cedar Fair has learned how to bring the best practices from other industries such as hotels and cruise lines and integrate them into their business.

Ouimet said technology is also a big driver for amusement parks including everything from electronic tickets to the latest high-speed roller coasters and attractions. That's why 2013 is proving to be the biggest opening weekend ever for the company.

When asked whether gas prices affect Cedar Fair's business, Ouimet said that since most guests come from two hours away or less, gas is not a factor, but employment is. That's why as employment improves, more families are resuming their yearly trips to Cedar Fair parks.

Turning to other drivers in the business, Ouimet noted that while many parks used to shut down after Labor Day, Halloween is now emerging as an added bonus for amusement parks that offer seasonal offerings for that holiday. He also said that with every major market now being served by an amusement park, it's unlikely that another regional amusement park will ever be built again in the U.S.

Cramer said Cedar Fair remains a great company with a terrific yield.

Lightning Round

In the Lightning Round, Cramer was bullish on Valero Energy ( VLO), Abbott Laboratories ( ABT), Fifth Third Bancorp ( FITB), Huntington Bancshares ( HBAN), KeyCorp ( KEY), Omega Healthcare ( OHI), Icahn Enterprises ( IEP) and Canadian Natural Resources ( CNQ).

Cramer was bearish on Goodyear Tire & Rubber ( GT).

Breakup Stories

In another installment of red-hot stocks that could be prospective breakup stories, Cramer highlighted Applied Materials ( AMAT), the semiconductor equipment maker that's been all but left for dead as the demand for PCs has been waning. But Cramer said that, according to the company, the semiconductor equipment business has bottomed and orders for 2013 are so far already ahead of plan.

So what's the breakup angle? Cramer explained that Applied Materials consists of three divisions, its old-line semiconductor equipment business, a division that makes equipment for LCD and OLED display panels and a third that makers equipment for solar panels. He said it's the latter that's been holding the company back, which has some analyst calling for Applied Materials to shut down that segment altogether.

But Cramer said that shutting down the solar business would be a mistake because much of the supply for solar cells has disappeared and a bottom in that market may be at hand later in 2013. What would make more sense, he said, would be to spin off the solar division, along with the LCD division, to make a speculative maker of panels, leaving the old line semiconductor equipment business behind.

Given comparable valuations, Cramer said the core semi business is worth at least three times sales, or 25% more than shares trade today. Give the new panel entity a one times sales valuation and that would add an additional $800 million, taking the total value 30% higher than today.

Cramer said that with the fundamentals in all of Applied Materials' businesses getting stronger, he feels the company is worth upwards of $22 a share over the long-term, which would value share a full 50% higher than today.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said the end of the government's bond-buying program just isn't as dangerous as it used to be, thanks to the revelation the Federal Reserve might actually have a plan after all.

Cramer said he's still not a fan of buying long-term bond funds, but he can certainly see demand for bonds returning as rates begin to climb. He said the rising of longer-term rates would be welcome news for the banks, which have been saddled with horrible net interest margins for years now.

Finally, Cramer said that with the government now raising more money in taxes and spending less from the sequester, it might actually not need to sell as many bonds as previously thought.

Adding all these facts together, Cramer said the risks to stocks that pay dividend is a lot less than it was just a few short months ago. That's why he's not betting on a big market collapse when the Fed finally announces its buying will cease.

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 ABT.

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.

More from Jim Cramer

Regions Financial, Edwards Lifesciences: 'Mad Money' Lightning Round

Regions Financial, Edwards Lifesciences: 'Mad Money' Lightning Round

First Horizon National: Cramer's Top Takeaways

First Horizon National: Cramer's Top Takeaways

Waste Management: Cramer's Top Takeaways

Waste Management: Cramer's Top Takeaways

Jim Cramer: Will Apple or Amazon Become the World's First Trillion Dollar Stock?

Jim Cramer: Will Apple or Amazon Become the World's First Trillion Dollar Stock?

Not Thankful for Fridays: Cramer's 'Mad Money' Recap (Friday 4/20/18)

Not Thankful for Fridays: Cramer's 'Mad Money' Recap (Friday 4/20/18)