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Loss of Integrity - Cramer's Mad Money Recap (9/3/08)

by: SA Editor Joan Wickham September 03, 2008 | about stocks: BAC / BBT / BUCY / CELG / CPL / CSX / ED / GD / GIS / GM / HD / IBM / JOYG / MO / NSC / RF / SGP / TEVA / VZ / WAG    

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Joan Wickham

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Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, September 3.

Failure of Integrity - Regions Financial (RF), BB&T (BBT)

“The failure of Integrity Bank over the weekend is not just another bank failure,” Jim Cramer told viewers. He said the breakup of Integrity was “a monumental shift in strategy” and illustrates how the Federal Deposit Insurance Commission (FDIC) will handle bank failures from now on. Cramer commended the FDIC for adopting a plan which he has been advocating for months, one that splits failed entities into “good” and “bad” parts. The Integrity deal calls for Regions Financial to acquire Integrity's “good” parts, mainly $900 million worth of deposits, while the FDIC assumes the “bad” parts, including all of the bank's failed and failing loans. “This is the plan we've been waiting for,” said Cramer, who replayed an appearance on NBC's Today Show back in July where he advocated the plan. He called the FDIC's shift in strategy terrific news for stronger banks which are now poised to pick up great assets from failing entities. Cramer recommended BB&T, a strong, yet conservative, Southern bank with a 6.36% yield that is ready to reap the rewards of the FDIC's new strategy. Cramer said BB&T tightened its underwriting policies back in 2005, ahead of the subprime crisis. Only 1.36% of its loans are currently listed as non-performing and the bank has only a .63% charge off rate. The bank is also still growing, with loans up 9% last month. He called BB&T the logical choice to acquire assets from future failed banks.

Big Coal Drop - Joy Global (JOYG), Bucyrus (BUCY)

Cramer put Joy Global president and CEO Mike Sutherlin in the hot seat to get answers about the company's recent earnings shortfall. Sutherlin said his company enjoyed record orders and revenues this quarter and felt the market overreacted to the company's margin issues. He called the current market environment negative on anything commodity related. Sutherlin said Joy Global is in a strong position with share buybacks, solid cash reserves and tremendous upside potential. The company's backlogs extend well into 2010 to 2011, he said. On China's currently soft market, Sutherlin said the country often goes through stocking and restocking cycles and is now suffering from weakness due to the Olympics and seasonality. He still sees China as desperately short of coal and expects strong demand to return soon. Cramer predicted more pain for Joy Global. He said the oil service sector will have to bottom first before he would recommend buying Joy Global and his other favorite Bucyrus.

Am I Diversified?

Portfolio 1:

  • Teva Pharmaceuticals (TEVA)

  • Altria (MO)

  • Walgreens (WAG)

  • Home Depot (HD)

  • General Mills (GIS)

Cramer said this portfolio has two retailers with Home Depot and Walgreens and needed a financial stock. 

Portfolio 2:

  • Bank of America (BAC)

  • ConEd (ED)

  • General Dynamics (GD)

  • General Motors (GM)

  • Verizon (VZ)

Cramer called this portfolio perfect.

Mad Mail - Schering-Plough (SGP), IBM (IBM), CPFL Energia (CPL), Celgene (CELG), CSX (CSX), Norfolk Southern (NSC)

Stock 1: Although Cramer felt bad about selling Schering-Plough, he stood by his comments on Tuesday's show that the negative press surrounding the company will limit any upside.

Stock 2: The selling in IBM is overdone, and he sees the company as a buying opportunity.

Stock 3: Cramer said he still thinks that CPFL Energia is a buy.

Stock 4: Cramer reiterated buying Celgene.

Stock 5: He prefers CSX over railroad competitor Norfolk Southern.

Sudden Death - Salesforce.com (CRM), Genentech (DNA), Steel Dynamics (STLD)

Cramer was bearish on Salesforce.com, Genentech and Steel Dynamics.

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This article has 8 comments:

  •  
    Sep 03 11:20 PM
    save for GD, portfolio 2 is "perfectly" in the crapper...........
    Reply
  •  
    Sep 04 08:38 AM
    Cramer's game (and portfolio approvals) illustrates the danger of overemphasizing diversity at the expense of quality stock selection.
    Reply
  •  
    Sep 04 08:59 AM
    Cramer says year of natural gas. Don't listen to him.
    Reply
  •  
    Sep 04 01:33 PM
    Right, the taxpayers get stuck with the bad debt and the banks get only the good parts? This is socialism pure and simple. Write your congressman and senator. If they don't respond appropriately then vote the bums out. Remember this is an election year and don't forget to VOTE!
    Reply
  •  
    Sep 04 03:29 PM
    Starting from scratch these might be good portfolios. At least they are diversified!
    Reply
  •  
    Sep 06 05:27 PM
    hey ray, i disagree with you especially on portfolio two..... they are not diversified as you think...VZ, BAC and ED are highly leveraged companies with their huge payouts and thus have tremendous exposure to rising rates if the dopey fed has anything to say about it.... the unpopular war and imminent troop pull out does not make GD attractive over the next two years....and as for GM...what can i say...the longer wagoner is there, the closer they are to bankruptcy....it's that simple...though not published yet inevitable, GM is third in line behind FNM and FRE for the government hand out.....
    starting from scratch a novice investor should consider the following portfolio...JNJ (or PG), GE (or MMM), MO (or UN), XOM (or SLB) and IBM (or CSCO)....here's two portfolios...the best of the best...and of course...completely diversified!
    Reply
  •  
    Sep 09 06:47 PM
    Did you say diversified or deworseified. Think about. Anytime you are attempting to diversified you are acknoldgeing you do not know which sector is strong or weak, so you keep selecting hoping to pick at least a few winners while you are intentionally including losers.


    On Sep 06 05:27 PM cambio2008 wrote:

    > hey ray, i disagree with you especially on portfolio two..... they
    > are not diversified as you think...VZ, BAC and ED are highly leveraged
    > companies with their huge payouts and thus have tremendous exposure
    > to rising rates if the dopey fed has anything to say about it....
    > the unpopular war and imminent troop pull out does not make GD attractive
    > over the next two years....and as for GM...what can i say...the longer
    > wagoner is there, the closer they are to bankruptcy....it's that
    > simple...though not published yet inevitable, GM is third in line
    > behind FNM and FRE for the government hand out.....
    > starting from scratch a novice investor should consider the following
    > portfolio...JNJ (or PG), GE (or MMM), MO (or UN), XOM (or SLB) and
    > IBM (or CSCO)....here's two portfolios...the best of the best...and
    > of course...completely diversified!
    Reply
  •  
    Sep 16 11:23 AM
    ..."bud i like you"....to quote an infamous movie...

    it's clear you don't understand what diversification means because you're either a day trader or lack fundamental investing knowledge...not all sectors move in tandem....you don't have a crystal ball and you don't know when sectors will turn...great investors are always ahead of the curve and let their portfolios work for them instead of working for your portfolio as you do..."stick to the fundamentals.." my friend and don't play a guessing game or "market timing"....you're too caught up in the movie...get back to reality.......

    "intentionally picking losers.." is nonsense talk.......
    Reply
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