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NEW YORK ( TheStreet) -- The market's volatility may be annoying but smart investors should be using the market's ups and downs to make money, Jim Cramer said on Mad Money Monday.
The markets are clearly not being driven by the fundamentals but by the whims of hedge fund managers trying to make sense of the of the world's topsy-turvy economies, he added. But right here at home good things are happened, as today's uptick in consumer spending proved.
Indeed, the U.S. consumer is taking advantage of lower gas prices to spend more and dine out more, which is why Cramer continues to recommend buying retail, restaurants and apparel stocks.
But beyond those sectors, good things also happened, Cramer continued, as the 24% gain in Athlon Energy (ATHL) and the 21% gain in Tibco Software (TIBX) proved. Cramer called these mergers and acquisitions "wealth-creating moves" that won't be the last we'll see in this market.
Cramer noted the old adage of "buy low and sell high," telling viewers to lighten up on their holdings the next time the market soars so they can buy them back at lower prices during the next inevitable selloff.
Why So Few LBOs?
With Tibco Software announcing that it's being taken private in a leveraged buyout deal, Cramer said it's worth noting just how rare leveraged buyouts have become.
Overall, mergers and acquisitions are up 20% so far this year, Cramer noted, yet LBOs have only seen a 6% rise despite the fact that private equity firms are sitting on mountains of cash and can borrow even more at very cheap rates.
Why the disparity? Cramer said it's because in the private equity business model firms make acquisitions, slash costs and improve operations, then sell the new leaner and meaner companies back to the public markets in initial public offerings. But with so many companies having already cut costs to stay alive, there aren't many good takeover candidates for private equity to buy.
That means public companies have the advantage, as any company they buy can instantly cut costs by exploiting the synergies that private equity can't. Cramer said it's more likely we'll see hybrid deals as we saw last year with Heinz. In that deal, private equity teamed up with Warren Buffett's Berkshire Hathaway (BRK.B - Get Report) to get the deal done, making it the best of both worlds.
Investors looking for a bright spot in a volatile market need to look no further than Kroger (KR - Get Report) , Cramer told viewers. Our nation's second-largest grocery chain has seen its shares double over the past 17 months, but Cramer said it's still a buy, even just off its 52-week high.
After years of getting squeezed from increased competition from the likes of Wal-Mart (WMT - Get Report) , Target (TGT - Get Report) and Costco (COST - Get Report) , Cramer said Kroger finally got its act together and stopped competing on price and started focusing on the customer. That decision has led to ever-increasing same-store sales and gross margins.
Kroger has also invested heavily in natural and organic products featuring its own private-label brand with over 400 items in 45 categories. Kroger has also invested in technology, including mobile coupons and apps and a beefed-up loyalty program.
Yet, despite all its positives, Cramer said Kroger still trades at just 14 times earnings, despite a 12% growth rate and a modest 1.4% dividend yield. Kroger also has a $1 billion share repurchase program that has already retired 20% of the company's shares since 2010.
Executive Decision: Phil Fernandez
For his "Executive Decision" segment, Cramer sat down with Phil Fernandez, chairman and CEO of Marketo (MKTO) , the cloud computing company helping to connect businesses with their customers.
Fernandez confirmed that Marketo expects to be cash-flow positive in calendar 2016, ahead of previous expectations. Cramer said this metric is important because cash-flow is what matters most to software-as-a-service companies.
Fernandez highlighted the company's partnership with My Fitness Pal, a fitness app with over 65 million users, as one of Marketo's successful forays into the business-to-consumer space. He said Marketo's platform is helping My Fitness Pal keep members motivated throughout the day.
Cramer was bearish on Ensco International (ESV - Get Report) , Westport Innovations (WPRT - Get Report) , Pandora Media (P) , Tekmira Pharmaceuticals (TKMR) , Annaly Capital (NLY - Get Report) and Oracle (ORCL - Get Report) .
No Huddle Offense
In his "No Huddle Offense" segment, Cramer said it's not the Federal Reserve that controls this market, it's the supply of new stock.
Cramer explained that the markets have seen over $28 billion of new equities issues this year, but far less than that has been taken out via mergers, acquisitions and buybacks. That's created a momentary imbalance that's only made worse by fund managers taking their initial public offering gains and heading for the sidelines.
With the world economy downshifting everywhere expect for the U.S., Cramer said the next 5% move in the markets, up or down, will hinge on whether IPOs continue their fever pace or whether bankers start holding them back and let the markets absorb what's already out there.
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-- Written by Scott Rutt in Washington, D.C.
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