Cramer's 'Mad Money' Recap: Stocks Still Make Sense

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NEW YORK ( TheStreet) -- The easy money may have already been made, but there's still plenty of harder money to go around, Jim Cramer told his "Mad Money" TV show viewers Thursday, as the markets reached new all-time highs. Yes, he said, there are still profits ahead of us.

Cramer said that while the bears may argue the markets' sensational rally from its 2009 lows are nothing but artificial inflation caused by the Federal Reserve, in reality this argument has nothing to do with making money. When you go to the bank to make a deposit, they never ask whether the money was made in legitimate or "artificial" markets, they accept it either way.

The lesson to be learned from 2009 until now is that once again, panic is not an investment strategy and is never acceptable. The bears have pronounced the markets dead time and time again, only to be wrong time and time again. In 2008, there was indeed systemic risk to the markets, which is why Cramer called for investors to head for the hills.

But after a 50% haircut in the Dow Jones Industrial Average and the Federal Reserve proclaiming that no more banks will be failing, that risk was removed, and it's been all systems go ever since.

Why do stocks still make sense in today's market? Cramer said its because they've proven to institutional and individual investors alike that they can withstand rising interest rates, weakness in Europe and trouble elsewhere in the world and still flourish. Meanwhile, other asset classes, like gold and real estate, have proven to be tricky and not ones to be relied upon.

That's why Cramer said that with stocks back on the front page, he still thinks there are plenty of profits yet to be made.

Free Money

The initial public offering market continues to be red hot, and is perhaps the only place where the markets are essentially handing out free money, Cramer told viewers.

Cramer said the second quarter proved to be one of the best quarters ever for IPOs, with 61 deals netting investors on average a 21% return compared to just 2.4% or the S&P 500 during the same period. Making matters even better, a full nine out 10 IPOs last quarter weren't even profitable.

The IPO gains knew no boundaries, said Cramer. There were successful deals in health care, energy, technology, materials, financials and even in the transportation sector. Among the quarter's only losers were REITs and those with company-specific worries, such as Gogo ( GOGO), the in-flight wireless provider that now needs massive injections of capital in order to build out its network.

Cramer said the IPO trend will be continuing in the third quarter, which is why he wants investors to look into the upcoming IPOs of OncoMed Pharmaceuticals and Envision Healthcare, along with online coupon purveyors Retail Me Not, all of which will be coming soon to a market near you.

Pick the Right Dollar Store

Don't be tricked into buying the stock of the wrong dollar store, Cramer cautioned viewers. He said that shares of Family Dollar ( FDO) may have popped on earnings, but it's the least of Cramer's favorites in the group.

Cramer said while Family Dollar's earnings may have looked good on the surface, they were merely better than most people had feared. That's not really an achievement, said Cramer, which is why he continues to like rival Dollar General ( DG), which is up 26% for the year and is still worth owning.

Dollar General is expecting same-store sales to increase 4% to 5% this year and the company sees the opportunity for over 10,000 locations across the U.S. That's why the company plans to open a stunning 650 locations this year, while remodeling another 550. Shares of Dollar General trade at just 14.8 times earnings with a 15% growth rate, compared to 16.4 times for Family Dollar, which only has a 12% growth rate.

However, the most exciting stock in the dollar store space remains Five Below ( FIVE), said Cramer, which is a regional to national story that has already delivered a 122% return since its IPO last year. Five Below may trade at 41 times earnings, but with the company growing at a whopping 31% a year that multiple is well deserved.

Cramer said the demand for Five Below shares from institutional investors is far from over, which is why this stock remains on the top of his list.

Lightning Round

In the Lightning Round, Cramer was bullish on Zynga ( ZNGA), Joy Global ( JOY), Exelon ( EXC), Micron Technology ( MU) and Boeing ( BA).

Cramer was bearish on Alpha Natural Resources ( ANR) and Northrop Grumman ( NOC).

Executive Decision: Jeff Stein

In the "Executive Decision" segment, Cramer spoke with Jeff Stein, president and CEO of Trius Therapeutics ( TSRX), a biotech on the front lines in fighting drug-resistant bacteria. Shares of Trius have already doubled this year.

Stein said there has been a significant change of mindset regarding drug-resistant bacteria. He said one year ago Congress passed the GAIN Act, which stands for Generate Antibiotic Incentives Now. That act has turned the Food and Drug Administration into a terrific partner in helping to get much needed new drugs to market as quickly as possible.

Stein explained that every year over 100,000 patients die in hospitals from infections that simply cannot be treated by current antibiotics. He said the problem is huge, which is why Trius' drugs are aiming to not only combat the problem head on, but also get patients out of the hospital faster so they can avoid exposure in the first place.

When asked about the company's expansion plans, Stein said Trius is partnering with some terrific companies to bring its drugs to market around the globe. He said the focus will be on both development and commercialization going forward.

Cramer said Trius remains a great story, but with a red-hot, low-dollar stock, investors must use limit orders when purchasing shares.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer asked the question: Is the rally in the bank stocks over?

Cramer noted that while interest rates have begun to rise, the banks still lack the pricing power to increase their net interest margins, which is one way they make money. More regulations have also meant banks still need to raise more capital, which means less money is available for lending. Finally, he noted that mortgage loans have taken a momentary decline after last month's interest rate spike, also hampering short-term gains for the banks.

So does that mean the rally is over? Cramer said that the long-term prospects for an economy on the mend continue to favor the banks, which is why he would still be a buyer on weakness.

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 JOY.

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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