Cramer's 'Mad Money' Recap: A Family Affair

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NEW YORK ( TheStreet) -- Invest in "best of breed" stocks at an early age and your money will grow beyond your expectations, Jim Cramer told a live audience of his "Mad Money" TV show Thursday.

Kicking off his annual "Family Affair" episode, Cramer revisited his kid-friendly portfolio of five stocks that parents should be buying for their kids.

Cramer noted that while his kid-friendly stocks have handily outperformed the markets, rising 140% versus just 83% for the S&P 500, it's time to make a few changes to the household names that every kid would recognize.

Cramer said he's still bullish on Walt Disney ( DIS) because that company continues to outperform in everything from movies to theme parks to its ESPN franchise. He said he's also sticking with McDonald's ( MCD) as that chain reinvents its menu to meet changing appetites around the globe.

Toymaker Hasbro ( HAS) is not making the cut, however. Cramer said a stock like Whole Foods ( WFM) not only offers more growth, but also makes kids aware of healthy eating right from the start.

Another stock not making the grade was Nike ( NKE), a company that Cramer said had too much China exposure. Instead, Cramer advised swapping into Gap Stores ( GPS), the retailer that has turned itself around to great results.

Finally, there's Apple ( AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS . He said that Apple used to beat the estimates quarter after quarter, but those days may now be over. He suggested turning to another household tech name, Google ( GOOG).

Don't be scared away from individual stocks, Cramer concluded. These companies can be bought and held for the long term and teach the next generation of investors the importance of the stock market to their financial well-being.

An Rx for Rite Aid Investors

Cramer had some sobering words for investors in Rite Aid ( RAD), our nation's number three drugstore chain. He said after the stock's monster 132% rally since the beginning of the year, it's now time to declare victory and put that money to work in a better chain, CVS Caremark ( CVS).

Cramer explained that after years of lagging its peers, Rite Aid was finally able to turn itself around earlier this year. The company delivered monster earnings in April, making 13 cents a share when the analysts were expecting just 1 cent. Then it announced the refinancing of much of its high-interest debts at much more favorable rates. That news sent shares soaring but it also created a big problem, Cramer said.

The problem is valuation -- Rite Aid now trades at 12.9 times earnings, just a hair below that of CVS at 13.2 times and Walgreens ( WAG) at 13.4 times earnings. CVS and Walgreens offer dividends. Rite Aid does not.

That's why Cramer said it's time to ring the register on Rite Aid and move into CVS, which not only is a better retailer but also benefits from Caremark, its pharmacy benefit management service. With millions more Americans set to have health insurance, Cramer said CVS will be the natural beneficiary on both sides of its business.

Least Valuable Players

For the next installment of his Miami versus San Antonio basketball-style shootout, Cramer shifted gears from the winning stocks from each city to the "least valuable players," the stocks investors need to avoid at all costs.

From Miami, Cramer said the choice was easy: Carnival Cruises ( CCL), the ship operator that seems to be doing everything in its power to make sure no one ever takes a cruise again, Cramer quipped. He said less than a year after the company's disaster off the shores of Italy, another Carnival ship lost power and was set adrift for five days, leaving patrons most uncomfortable and in unsanitary conditions.

While Carnival initially said the incident would only ding earnings by 10 cents a share, it was forced to later revise those numbers and cut full-year guidance.

But San Antonio has its losers, too, noted Cramer, mainly Rackspace ( RAX), the data center operator that now finds itself in a commodity business fighting against the likes of Amazon.com ( AMZN) and others. Cramer said that after reporting an abysmal quarter, shares fell from $75 to $60 a share but still trade at 40 times earnings.

While both stocks are bad, Cramer said Rackspace wins the "least valuable" award because the company can do little to change its position in the marketplace.

Lightning Round

In the Lightning Round, Cramer was bullish on Barnes & Noble ( BKS), Citigroup ( C), Gigamon ( GIMO), Duke Energy ( DUK) and Under Armour ( UA).

Cramer was bearish on Chuy's Holdings ( CHUY).

Quizzing Cramer

In a special "Quiz Cramer" segment, Cramer took questions from his audience.

When asked how to teach younger investors the patience needed to invest for the long haul, Cramer said he advises that all investors look for stocks they think will do well in 2015. He said by setting a longer time horizon, it's easier to let short-term gains keep going.

When asked whether it's time to sell General Motors ( GM), Cramer said he'd hold onto that stock until the company resumes paying a bountiful dividend.

Finally, when asked for a stock pick from the quizzer's home state of Alaska, Cramer said he's still a fan of Alaska Air ( ALK).

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.

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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