Jim Cramer's Mad Money Review

Merrill Lynch (MER): 'Last week Merrill had estimates cut by Golden Sachs and it's done going down. ... That's the bottom. ... I like Merril Lynch. Barrick Gold (ABX): 'Don't trade down to Northgate. Trade up to Barrick.' ValueClick (VCLK): 'My short-term and long-term outlook is the same. ... ValueClick at 24 is going to have to be acquired by someone. ... I do a triple-buy on ValueClick.' National City (NCC) Huntington (HBAN) Corning (GLW): 'Corning's got two businesses ... it's got the fiber business, which I like very much, and it's got the crystal liquid display business, which I also like very much. I'm looking for an upside surprise in Corning.' Cramer's Take – Enbridge (ENB): 'I think Enbridge is one of the great pipeline companies. ... I recommend Enbridge.' Intuitive Surgical (ISRG) Companhia Vale do Rio Doce (RIO) China Mobile (CHL)
Bearish calls:
Ruth's Chris Steak House (RUTH): ' …it's a very well-run company ... But there is nothing that is setting the table. ... I think you should sell Ruth's Chris. ... It's just nothing special.' Cree (CREE): ‘It's been way too hard to trade, way too many disappointments. ... I want you to stay away from Cree.' Brunswick (BC): 'You cannot own that stock going into a slowdown. You have to sell that stock going into a slowdown.' Northgate Minerals (NXG): 'I owned the stock. ... They crushed me, I got beaten up…' First Bancorp (FBP)
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Labels: ABX, BC, CHL, CREE, ENB, FBP, GLW, HBAN, ISRG, Jim Cramer, Lightning Round, MER, NCC, NXG, RIO, RUTH, VCLK

Waste Not, Want Not: American Ecology (NASDAQ: ECOL - News), Stericycle (NASDAQ: SRCL - News)
"Hazardous waste equals mad money," says Cramer, adding that ECOL is a good secular growth stock which has limited competition thanks to a "government-sanctioned oligopoly" which restricts the number of companies which are permitted to deal with toxic waste. There are currently only five analysts covering ECOL, and Cramer likes its solid yield of 3.4%. Another "strong secular grower" is SRCL which is up 14 points since Cramer recommended it, but is still worth buying, he says, because it is the "only national player in the medical-waste business." SRCL has contracts with hospitals, which means steady income for the company.
One Stock, Two Views: Bed, Bath and Beyond (NASDAQ: BBBY - News)
Although Cramer thinks that BBBY is expensive based on its earnings, has an outdated concept and is suffering because of the slow housing market, Cramer would not sell the stock. The paradox surrounding BBBY is that Morgan Keegan downgraded it because of "declining fundamentals" and Goldman Sachs upgraded it because of "improving fundamentals." Looking at both sides of the BBBY story, Cramer explained that Morgan reported that the company's guidance was "reasonable," which indicates that it is not expected to overdeliver. Morgan also feels that BBBY's buyback will be completed too early, and that valuation of its stores does not include risks such as a deceleration of sales growth. However, Goldman noted that BBBY tends to have a low guidance and beats it, and Goldman likes the company's buyback as well as its purchase of Christmas Tree Shops. Cramer commented that this story about BBBY illustrates that two analysts can make "totally different conclusions" based on the same facts, and the winner of the debate will be determined ultimately by the price of the stock. In conclusion, Cramer would not pick up BBBY now, because he agrees with Morgan concerning the company's earnings. However, he would not sell it because he thinks BBBY might be bought by a private equity firm. At $40, the stock is "no man's land," but if it were higher or lower, he might buy or take profits.

CEO Interview : Craig Miller Ruth's Chris Steak House (NASDAQ: RUTH - News)
Cramer asked Craig Miller how he could preannounce that the fourth quarter will be up; "We have a terrific brand," Miller replied. Concerning pricing, last year the restaurant had 5% hedged, and this year more than 50% is hedged. In spite of labor issues, Miller is confident, and believes that the company's strength is the kind of dining experience it provides for its customers, and hopes to build more restaurants. Although Ruth's past success has not generated wealth for its shareholders, Miller expects this situation to improve as RUTH gains credibility and the market comprehends its business model. He also notes that RUTH is reinvesting cash flow to develop its brand, and is looking forward to overseas expansion.
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Labels: BBBY, ECOL, Jim Cramer, Mad Money, RUTH, SRCL

Rule #1: Resisting the Business Cycle, United Health Group (NYSE: UNH - News)
Cramer discussed more rules from his books: Jim Cramer's Real Money: Sane Investing in an Insane World, and Jim Cramer's Mad Money: Watch TV, Get Rich. His first rule deals with the business cycle which is largely controlled by the Federal Reserve's raising and cutting interest rates. When rates are reduced, the economy gets stronger, and investors should buy cyclicals such as "the dirty, smokestack stocks that make things like machinery, cars and minerals." When the Fed raises rates, the economy gets weaker, and it is time to get out of cyclical stocks and into companies that produce consumer staples, such as food and drugs. "You can't own cyclical stocks when the economy stinks, and you should stay away from the consumer staples when the economy's stronger," Cramer said, adding that this applies even if a company has strong fundamentals. He recalls his error of holding on to UNH when the economy picked up, and said that the selloff during the boom was a much bigger factor in the stock's decline than UNH's involvement in an options-backdating scandal.
Rule #2: "Analysts are never bullish enough on good stocks, and ... never bearish enough on bad stocks.": Ebay (NASDAQ: EBAY - News), Amazon (NASDAQ: AMZN - News) and Lucent (NYSE: LU - News)
The reason for the second rule is that analysts covering a stock are dealing with an entire sector for which they must find some stocks that are buys, sells and holds. "The Street will almost always treat a sector that's en fuego as being a lot less en fuego than it actually is," he said. Knowing this, investors can more easily spot which sectors are hot but underappreciated.He noted that this happened with oil stocks during certain times in the past few years when the sector was hot. Even the companies that were neglected or had a "sell" rating went up anyway. It can work the other way too, and Cramer thinks that analysts should have stayed bearish on eBay, Amazon and Lucent for a longer period of time.
Rule #3: Don't Be a Snob, Darden (NYSE: DRI - News), Ruth's Chris Steakhouse (NASDAQ: RUTH - News), Morton's (NYSE: MRT - News)
Because analysts inhabit an upper-class bubble, Cramer says they often miss out on companies that make low-end or mid-grade products. While they can more easily relate to stocks such as RUTH and MRT, most analysts missed out on 50% of Darden's big move between January 2005 and March 2006 because they turned their noses up at Red Lobster and the Olive Garden.
Rule #4 : "Whenever a stock is being heavily shorted and heavily hyped at the same time, it's time to sell that stock," NutriSystem (NASDAQ: NTRI - News)
Hype and a large short interest do not mix, but create a battleground where an investors should fear to tread, and Cramer commented, "You don't do something as risky as shorting a stock unless you're a well-educated investor who has done his or her homework on the thing." One can do research on a stock page on Yahoo or Google finance to see the percentage of shares that are shorted, and a large percentage of shorts indicates that there is a problem the bulls don't know about or do not want to face, as was the case with NTRI, which had problems with its distribution model. "So when all the analysts are having their lovefest with the stock, and you have an army of shorts sitting on the sidelines, you should see a red flag," Cramer said.
"Past performance is not indicative of future success."
Cramer warns viewers not to rely on past successes as a model for future investments, since "stocks have no memory and you could lose big." Investors should aim to make money, but not to feel "invincible" if they do and should avoid following the same patterns. Cramer recommended playing by the rules outlined in his books for successful investing.

Labels: AMZN, DRI, EBAY, Jim Cramer, LU, Mad Money, MRT, NTRI, RUTH, UNH