Jim Cramer “Mad Money” Recap

Posted by Blain Reinkensmeyer
August 9, 2006 at 10:22 pm

***Written By: Blain Reinkensmeyer Stock Forum ID: StockTrading101***

The theme today revolved around acquisitions, and not good ones. Some analysts Jim said talk up acquisitions because that’s how they get their bonuses, but not every acquisition is worth looking at. A quick example he gave was when Brocade Communications (BRCD) announced its merger with McData (MCDTA); the stock feel from $6 to $5. Five types of bad acquisitions:

The “I am getting out while the getting is good kind, which is when companies are overvalued and want out. The best example of this was the Sprint Nextel (S) deal, making the stock a great one to sell.
The “don’t just stand there, do something” kind, which happens when a company that’s in trouble and to ease its problems buys out another company. Anyone remember when eBay (EBAY) purchased Skype? Well, that’s one example Cramer said.
“Panic and overpay” occurs when the buyer pays to much for the other company because they are worried about competition or slowing growth. Jim Cramer’s example of this acquisition type was when EMC (EMC) overpaid for RSA Security (RSAS).
Jim calls this type the “two drunken sailors trying to keep each other up” deal. This tragic merger comes when two bad companies who can’t make quarter estimates try to stay afloat by merging. The Alcatel (ALA) and Lucent (LU) combination are a good example of this, Jim said. Cramer tells us to sell both of these drunken sailors.
The 5th and worst scenario is when a little company takes on a larger company for the bidding of a 3rd company. This creates bad situations. Try Boston Scientific (BDX) vs. Johnson & Johnson (JNJ) over Guidant.

But there is also companies in good shape because of good acquisitions, and Jim gave us four good stocks that fit this quality: Federated Department Stores (FD), Whirlpool (WHR), Procter & Gamble (PG), and Johnson & Johnson.

The rest of the show covered “Am I Diversified” and the Lightning Round. Some bullish picks from the Lightning Round were Bank of America (BAC), Exxon Mobil (XOM), Rentech (RTK), and Black & Decker (BDK), amongst others. Bearish picks included LoopNet (LOOP), Countrywide Financial (CFC), Medtronic (MDT), and Solexa (SLXA).

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