Jim Cramer's 'Mad Money' Recap: Cyclical Stocks Are Fund Manager Picks Now

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NEW YORK ( TheStreet) -- Although the Dow Jones Industrial Average and S&P 500 continue to grind higher, there’s a much bigger rotation going under the hood, Jim Cramer explained to his Mad Money viewers on Wednesday.

Secular growth stocks -- those which are non-cyclical and don’t necessarily need a strong economic environment in order to thrive -- did very well for a very long time, he said. That means staple stocks like PepsiCo (PEP) and Procter & Gamble (PG)  and drug stocks like Bristol-Myers Squibb (BMY) , Allergan (AGN) , Celgene (CELG) and Gilead Sciences (GILD) .

But that all changed today, Cramer said. Fund managers are looking to “rest” their top stock picks and bring in some “bench” stocks, which have been laggards in the rally. So now it’s time for the cyclical stocks to be the leaders.

Believe it or not, truck orders are actually a great way to get a pulse on the overall economy, he explained. Those just hit eight-year highs, which is good for companies including Caterpillar (CAT) , Action Alerts Plus holding Eaton Corp. (ETN) , Joy Global (JOY) and Cummins (CMI) .

Industrial technology stocks like Intel (INTC) , Hewlett-Packard (HPQ) and Micron (MU) also need a strengthening economy to thrive. Others, like SanDisk (SNDK) , Cisco Systems (CSCO) and EMC Corp. (EMC) , are only in the “early stages of moving higher,” he said.

Plenty of other cyclical plays can continue moving higher, especially if Friday’s non-farm payrolls report is “halfway decent,” Cramer added. So while the averages continue to creep higher, investors should realize the subtle, yet important rotation that’s taking place behind the scenes.

Executive Decision: Manny Chirico

For the show’s “Executive Decision” segment, Cramer spoke with Manny Chirico, chairman and CEO of PVH Corp. (PVH)  , another Action Alerts PLUS holding.

The company beat on EPS estimates for the third quarter and boosted gross margins, but showed weakness in Europe, missed third-quarter revenue estimates and provided weaker-than-expected guidance for the fourth quarter.

The declining euro, which has fallen about 7.5% over the past several months, is really weighing on the European business, Chirico said. The region’s struggling economy and poor weather aren’t helping either. But the largest impact in Europe is tied to the currency woes, he explained.

In North America, the investment spending for the Calvin Klein brand will finish up in 2014, so the company will be able to reap the rewards in 2015. The company’s brands have been doing very well in J.C. Penney’s (JCP)  stores as well, he said.

Finally, Chirico added that falling gas prices have been great for consumers, but so far that extra spending money hasn’t been translating into increased sales in the apparel industry. Maybe that will change going forward and the company will keep a close eye on the business during the holiday season.

Cramer said he likes what he hears from Manny Chirico.

Off the Charts

Cramer drilled down on crude oil in the show’s “Off The Charts” segment. For assistance, looked at the technical analysis done by colleague Carolyn Boroden.

Crude continues to make lower lows and lower highs on the chart. “That’s a classic sign that things are still very bearish for this crucial commodity,” he explained. This is where Boroden uses her Fibonacci analysis. Oil prices bounced from just below $64, an area that has three key Fibonacci levels of support.

In order to solidify the current bounce, oil prices need to climb over $69.80 per barrel, he explained. But if this turns out to be another short-lived rally and the recent low fails to hold, it could get ugly in a hurry. The next significant level of Fibonacci support doesn’t come into play until around $51 per barrel, according to Boroden.

The bottom line is this: There are some positive signs, but not enough to endorse oil on the long side. This “confirms my thinking that you can’t expect a swift rebound in the price of oil to occur anytime soon,” Cramer said.

He like companies such as Halliburton (HAL) and Schlumberger (SLB) , but if he had to pick just one, he’d choose Schlumberger. Cramer advised against owning debt-heavy companies like Sanchez Energy (SN) .

Executive Decision: Justin Gover

For his second Executive Decision,” Cramer sat down with Justin Gover, CEO of GW Pharmaceuticals (GWPH) . This company is the one really legitimate way to play medical marijuana stocks, Cramer said, but acknowledged that it’s a speculative stock nonetheless.

Some of the company’s drugs are starting to show promise here in the U.S., especially its epilepsy treatment, Epidiolex, Gover said. While it’s only being used in testing, the company will continue to increase the number of patients in its studies. If all goes to plan, it may be approved by the FDA in 2016.

Gover explained that there are many different treatments that can stem from marijuana including treating pain associated with cancer, diabetes and multiple sclerosis, among others. The company has several decades worth of work in this regard and will remain busy finding treatments.

Cramer reminded his viewers that GW Pharmaceuticals is a speculative play. However, if some of these treatments come to fruition, the stock will be undervalued at today’s levels.

Lightning Round

In the Lightning Round, Cramer was bullish on Zynga (ZNGA) , Humana (HUM) , Google (GOOGL) and SolarCity (SCTY) .

Cramer was bearish on Chicago Bridge & Iron (CBI) , Yamana Gold  (AUY)  and Main Street Capital (MAIN) .

No Huddle Offense

In the show’s “No Huddle Offense” segment, Cramer visited the energy sector. He wanted to make sure his viewers who are buying into energy stocks at these levels are doing so responsibly.

Some of the high-quality plays including EOG Resources (EOG) , Pioneer Natural Resources (PXD) and Halliburton all may seem like great buys, but make sure not to take full positions here since there could be more downside ahead.

Investors who are buying should do so based on fundamentals, not takeover potential, Cramer said.

A lot of the high-debt oil companies in the high-yield junk bond market could struggle as well. Investors should avoid these types of stocks and he warned about weakness in others like Halcon (HK) , SandRidge Energy (SD) and Encana (ECA) , which paid higher property prices than their peers.

The bottom line is this: “There’s too much turmoil and not enough clarity” to jump into the energy sector with both feet, Cramer warned.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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-- Written by Bret Kenwell

At the time of publication, Cramer's Action Alerts PLUS had a position in ESV, GOOGL and PVH.

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