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Cramer’s Survival Portfolio

Friday, 20 Feb 2009 | 8:02 PM ET

Cramer just doesn’t trust this market. As he said on “Street Signs” Friday, it’s “too dangerous.” That’s why he called on investors to raise enough cash for any significant expenses they anticipate over the next five years. A full recovery is still some time away, so the market can’t be relied upon to generate that money.

Building A Recession Portfolio
Helping you survive the market turmoil, with Mad Money host Jim Cramer.

But what about the rest of your holdings? What do you do with them? Cramer pulled together a special portfolio to help investors survive this downturn. This basket of stocks should pare losses and help build a cash reserve. And the companies can be bought all the way down because, unlike some of their peers, they’ll be around five years from now.

Verizon Communications : Goldman Sachs on Friday blessed this stock, which yields 6.3% at present levels. The company’s growing earnings at a rate of 7%, the FiOS business is strong, and the Alltel acquisition has turned out to be a smart move. As long as Ivan Seidenberg’s at the helm, Cramer thinks VZ is a buy.

Wal-Mart : This discount retailer is the ultimate trade-down play. No matter how bad the market, we still have to eat, stay clean and buy new clothes. And when the money’s tight, we go to Wal-Mart. Cramer thinks this company has the balance sheet and the flexibility to outlast this recession.

BP : Another company offering a great dividend yield – 8.3% – the best of all the integrated oils. And management has said that as long as the price of crude stays near $40, they’ll keep paying it. In fact, BP said it would cut capital expenditures before the dividend. So that payout alone is reason to own the stock. But oil demand is rising, too, and that’s good news for BP, the company with the highest production growth in the sector.

General Mills : Cramer called this one a stable grower. General Mills is another recession play, meaning people will be eating the company’s soups, cereals and pastas at home rather than dining out. GIS also has less exposure to the U.S. dollar, so exchange rates aren’t hurting profits the way they are at competitors. And the stock is cheap. GIS is trading at just 13 times earnings, with the share price barely above its 52-week low.

Agnico-Eagle Mines : Don’t believe all that talk about a gold bubble. The price of this precious metal is going up for legitimate reasons. How about the potential for bank nationalization? Or the euro’s decline? When the market’s this volatile, investors seek safety. It’s called the flight to quality. And gold offers that. Cramer’s favorite stock is AEM, and he said the company has a multiyear run ahead of it.

Lastly, investors want to have a decent amount of cash on hand in this environment. Maybe as much as 25% to 30%, depending on their fear levels. This money will be used to buy all the broken stocks undeservedly headed lower with the market, giving investors the chance to ride them all the way back up.






Cramer's charitable trust owns BP, General Mills and Wal-Mart.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

  Price   Change %Change
AEM
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BP.
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GILD
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VZ
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WMT
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