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Homework: Cramer Discovers Tech Hotel Play

Tuesday, 23 Apr 2013 | 6:45 PM ET
You Ask, He Answers
Tuesday, 23 Apr 2013 | 6:45 PM ET
Mad Money host Jim Cramer answer your questions.

(Having trouble with the video? Click here!)

Sometimes Jim Cramer tells a caller that he needs to do homework before he can make a decision on a stock. And he's not kidding.

Following is Cramer's research or homework on stocks recently called to his attention by investors who watch the TV show.

Tooga | Getty Images

Whiting USA Trust II (WHZ)

On March 6th Al in Pennsylvania asked about Whiting USA Trust II, a statutory trust that came public about a year ago and yields close to 20%.

"This is not a master limited partnership like many of the other energy trusts," Cramer explained. "It was created by Whiting Petroleum as a dividend vehicle that owns a term net profits interest in many of Whiting's long-lived oil producing properties in the Rocky Mountains, the Permian Basin, the Gulf coast, and the Mid-Continent regions of the United States."

That means Whiting USA Trust II gets 90% of the net proceeds from the underlying properties, and then it returns those proceeds to shareholders in the form of a distribution.

"That sky-high yield may seem attractive, but the payout is totally hostage to oil and gas prices—that makes it very volatile," said Cramer. Although the yield is lower, "I think you'd be better off with a master limited partnership like Kinder Morgan Energy," said Cramer. (Read More: Best Run Company in Energy)


Micros Systems (MCRS)

Also on March 6th, Steven in South Carolina asked about Micros Systems, a company that provides information systems to 26,000 hotels and a hundred thousand retail stores.

"I like this one," said Cramer, "especially since the stock sells for just 16 times next year's earnings estimates, which is a nice discount to the company's 18% long-term growth rate. Plus, Micros could potentially unlock a lot of value by spinning off its hotel solutions business. I think MCRS makes total sense here," Cramer said.

Golar LNG (GLNG)

On March 7th, Marc in Wisconsin asked about Golar LNG, among the world's largest independent owners and operators of liquefied natural gas tankers.

"I applaud Golar's progess toward becoming an integrated midstream player in the LNG industry as they move upstream via floating natural gas liquefaction projects," said Cramer. "However, right now there's some short-term pressure on charter rates for these tankers, and as long as that pressure lasts I suggest staying on the sidelines."

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Western Asset Mortgage (WMC) / Two Harbors (TWO)

On March 11th Cliff from Florida asked about Western Asset Mortgage, WMC, while Joe from Indiana asked about Two Harbors, TWO, both are mortgage real estate investment trusts that generate significant yields.

"Western Asset Mortgage is what's known as a pure agency REIT, which means their mortgage-backed securities are all guaranteed by government sponsored enterprises like Fannie and Freddie, so there's no credit risk. However, the company plans to have an active portfolio management strategy, which means more risk but also a higher yield," Cramer said.

"Two Harbors, on the other hand, already has a non-agency component, meaning some of their mortgage securities are not guaranteed, so it has both credit risk and interest rate risk. But balancing that out, Two Harbors also has a seasoned management team with a strong track record."

Cramer however, can't get behind either stock. "I say why take the risk with these two when you can own best of breed mortgage REIT, Annaly Capital Management."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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  Price   Change %Change
WHIT USA TR II
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KMP
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MCRS
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GLNG
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NLY
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