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NEW YORK ( TheStreet) -- It's going to get ugly before it gets pretty, Jim Cramer warned his "Mad Money" viewers Thursday after the markets received their first sizable haircut of the week. Cramer said the government has finally created enough concern that people are starting to notice, and the earnings estimates will have to come down as a result. That will be the case with United Technologies ( UTX) -- the company announced it will be cutting 5,000 jobs as the government shutdown enters its third day. Cramer said that investors can expect estimates to Lockheed Martin ( LMT), General Dynamics ( GD) and Northrop Grumman ( NOC) to follow suit. Why should investors expect these estimate cuts? Because no one will increase spending ahead of what is becoming a total calamity in Washington. Congress needs to create far more pain and suffering in order to make its point, he continued, which is why the analysts will start getting ahead of the situation shortly. Then there's the "Mickey Mouse" factor, Cramer explained, where the longer the shutdown goes on the more international investors will view U.S. bonds and investments as a joke and move on to more stable and predictable investments. The Mickey Mouse factor used to refer to the rest of the world in decades past, said Cramer, but now we're the ones being laughed at by the rest of the world. Cramer said it will likely take another week before the investing public and the analysts begin to realize just how bad things could become, which is why he expects a lot more pain ahead before the time to get back in will be upon us.
A More Attractive F5 NetworksWhen stock prices go down, they only get cheaper, Cramer told viewers as he circled back to a networking equipment maker that he hasn't liked in years, F5 Networks ( FFIV). Cramer admitted that F5 has been a dog of a stock for many years, failing to outperform Cisco ( CSCO), which itself has been having a roughy couple of years. But with Internet traffic continuing to rise and a new product cycle ahead, Cramer said that F5 could be poised for a sizable turnaround.
F5 already enjoys huge gross margins nearing 83%, thanks to its growing software segment, Cramer explained. Now that the stock has gotten cheap and is likely to get even cheaper, that makes the stock attractive for the first time in a long while. Networking equipment makers trade on their product cycles, which is why F5's revenue were down 10% last quarter -- the company is gearing up for its biggest refresh in over three years. Add this to easy comparisons and it's easy to see how F5 can beat the estimates and surprise Wall Street. F5 is also a story about timing because the company reports right at the debt ceiling debate in Washington hits later this month, he pointed out. That will likely cause the stock to go unnoticed, at least until its analyst day on Nov. 14 when, hopefully, Washington is off the front page. Given the huge amount of cash on its books, Cramer said F5 will be one stock to watch going into the end of the year.
Focus on Franks InternationalInvestors need stocks that can transcend Washington, and that's why Cramer turned his sights on an oil service initial public offering, Franks International ( FI), which came public two months ago but was founded in 1938. Cramer explained that Franks manufactures the pipes and casings the oil drillers and offshore drillers need for their wells. The company competes with Weatherford ( WFT), but unlike Weatherford, which only has 6% of its revenue coming from pipes and casings, Franks is almost a pure play. What makes Franks so attractive? Cramer said the company has the opportunity to take share from Weatherford as that company struggles with accounting issues. Franks also focuses on offshore drilling, which is the fastest-growing segment of the industry at the moment. Unlike other oil services, once rigs begin using a certain type of casing, they're unlikely to switch. This gives Franks a "stickiness" not seen in the rest of the industry. Cramer said Franks is also a technology company and holds many patents that make its services unique. The company has a solid balance sheet with almost no debt and only came public to use its shares as a currency for upcoming acquisitions. With 43% gross margins and solid growth prospects ahead, Cramer said Franks is shaping up to be a real winner in the industry, especially with shares trading at only 19 times earnings.