First Trust Targets Another Closed-End Fund
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“Most people don’t even know the difference between a trade and an investment,” Jim Cramer told viewers of his “Mad Money” TV show Monday. “So much for conventional wisdom — let’s take a look at reality,” he said.
The way of thinking that casts trading as a “risky” undertaking is a legacy left over from when there was “more friction” in the system due to higher commissions and taxes, Cramer said. Buying and selling often was costly, and that’s what gave trading a “bad name.”
“We’re in a brave new world now with much lower commissions, and … capital gains taxes are as low as I’ve ever seen them,” Cramer said. “Buy and hold just does not cut it anymore.”
Cramer recommended that viewers get “active to be responsible.” He said, “You have to do your homework, and you have to take those profits while you’ve still got them.”
The stocks he recommends on “Mad Money” aren’t meant to be held for “eternity,” he said. Rather, viewers “should try to buy as low as possible and sell high.”
“That doesn’t make you a trader,” he said. “It makes you an intelligent manager of your own money.” A Marvell Idea in Semis
According to Cramer, the message from Wall Street is: “Trading is bad. Investing is good.” But, Cramer said, “Stocks aren’t trades or investments,” calling the distinction, based on the amount of time you own a stock, “meaningless.”
On Friday, J.P. Morgan and Deutsche Bank both upgraded semiconductor stocks to buy status, but Cramer said “they don’t think these stocks will actually turn until later this year.”
Those reports, he said, are written for big institutional investors — not for the viewers of Cramer’s show. “You’ve got more flexibility,” he said. “What you really want to do,” he continued, is “wait for the stocks to come down.”
He said he believes the semis have another bad quarter left. His recommendation is for Marvell (MRVL) , “the one that will probably have the single worst quarter of the semis that I follow.” Cramer owns Marvell for his Action Alerts PLUS charitable trust.
“Marvell is not a trade,” Cramer said. “It’s not an investment. It’s just a good idea.”
The company reports earnings on Feb. 26, and Cramer predicts the results will be “nasty-looking.”
“I would try to get into Marvell at a decent price before it reports on the 26th,” he said. “Below 18 is a decent price.” The stock closed Monday at $17.91.
“Marvell Tech is not a trade,” Cramer reminded viewers. On a trade, you’d wait and buy on a positive catalyst; with Marvell, he urged viewers to “do your homework … decide if you like the stock, and then wait for some weakness.”
“How you buy it, when you sell it — these things are all critical,” Cramer said, “and you need to work them out yourself. … Stop thinking of short-term investments as trades with all the associated stigma and evaluate them based on their merits.” Real Rigged Potential
“Short-term focus,” said Cramer, is the Achilles’ heel of Wall Street. Short-term focus, while not inherently problematic, becomes a problem when it “clouds the bigger picture,” he said. Whereas the Street has “abandoned” oil stocks, Cramer’s long-term view still sees potential there, particularly in National Oilwell Varco (NOV) .
National Oilwell is the “biggest maker of oil rigs on earth,” he said, and it reported an “amazing” quarter last week. It’s “really cheap,” Cramer said, and the company has “practically … a monopoly on making deep-water rigs. That’s where the money is.”
Plus, Cramer said, the “real buyer could be another company.” This morning, Teneris (TS) agreed to pay $97 a share in cash for Hydril (HYDL) , another stock the Street didn’t like, he said. Cramer believes something similar could happen to National Oilwell.
“Buy National Oilwell while it’s still cheap … and buy it before it could get a takeover bid,” Cramer said.
Viewer Q&A
In response to a caller, Cramer said that Sears Holdings (SHLD) could be another Berkshire Hathaway (BRKB) . Cramer, who owns Sears for his charitable trust, hasn’t sold a share, but he said he would sell if he saw any “deviation from … the Berkshire plan.”
Cramer reminded viewers that he couldn’t recommend stocks on his show “if the fundamentals are deteriorating.” Sprint’s (S) fundamentals, he said, are still deteriorating. “I keep waiting till the estimates get so low that they can’t deteriorate further,” he said. When that happens, “I will back up the truck.”
Another caller asked Cramer if the sales of one game could affect a video-game maker stock. According to Cramer, one game’s sales couldn’t impact the price of a stock of a $15 billion company such as Electronic Arts (ERTS) , but THQ (THQI) , which has a game coming out later this month, is a $2 billion company. That game’s sales might make a difference, Cramer said, “but the stock is not cheap,” and he did not recommend it. Mad Mail
In the show’s “Mad Mail” segment, Cramer said he agreed with one mailer’s son that Domino’s (DPZ) “pizza tastes good” and said that “the worst is over.” “Domino’s is a good chain,” Cramer said, and he told the viewer to hold on to it.
Cramer told another mailer that he believes Diageo (DEO) , a stock he owns for Action Alerts PLUS, is “terrific” and that Vonage (VG) “is still radically overpriced.” Lightning Round
Cramer was bullish on Allegheny Tech (ATI) , Transocean (RIG) , Virgin Media (VMED) , Countrywide Financial (CFC) , Allergan (AGN) , Microsoft (MSFT) , Zimmer Holdings (ZMH) , AMR (AMR) and Continental (CAL) .
Cramer was bearish on Evergreen Solar (ESLR) , Helmerich & Payne (HP) , New Century Financial (NEW) and JetBlue (JBLU) .
For more of Cramer’s insights during the Lightning Round, click here.
Want more Cramer? Check out Jim’s rules and commandments for investing from his popular book by http://www.thestreet.com/tsc/cramerbook.