Sell Block: Insana Too Bullish?

Ron Insana might be as recognizable to CNBC viewers as Jim Cramer. A former host of “Street Signs” and longtime contributor to the network, Insana has worked with and around stocks for 25 years. During Thursday’s show, the Mad Money host credited Insana with timing the end of the 1998 bear market. So to say that Cramer respects him would be an understatement.

That’s why Cramer was so struck by Insana’s latest call. He’s switched to bull from bear and announced he’s dumping all the defensive stocks in his portfolio. Bristol-Myers Squibb , The Walt Disney Co. , Cisco Systems , Microsoft , Pfizer , Time Warner and Verizon Communications are out, and the banks, homebuilders and insurers are in.

Remember, defensive stocks are those that work regardless of the economy. So if Insana turns his back on them, that means he’s taking a much more aggressive stance. He’s saying that the markets and the economy are about to turn up and probably turn up big. Cramer, however, largely disagreed with this thesis.

In the very least, Cramer said, investors want at least one or two defensive names in their portfolios for the sake of diversification. Especially if they pay dividends, such as Verizon and Bristol-Myers, which offer 6.4% and 6.3% yields, respectively.

Cramer also disagreed with Insana’s characterization of Cisco as a defensive stock. The company books and sells 85% of its business in each quarter. So when Cisco’s clients start spending again, CSCO should be one of the first stocks to go up.

Disney was another name that Cramer refused to label a sell, saying it was a good play on cheaper gasoline. But he did agree that Microsoft’s margins would suffer with Google’s new open-source operating system on the way. And he doubted that the Wyeth acquisition would do much for Pfizer, so both MSFT and PFE should be sold.

On the buy side, Cramer liked all of Insana’s bank picks: Bank of America , Citigroup , US Bancorp , Wells Fargo , JPMorgan Chase and Huntington Bancshares . Bank earnings this coming quarter should be “spectacular,” Cramer said, and he likes HBAN as a speculation play.

But buying the homebuilders is a mistake, Cramer said, referring to Insana’s endorsement of Hovnanian Enterprises, Lennar and Toll Brothers. While home prices seem to have stabilized, there’s no sign of appreciation just yet. And the homebuilders need that in order to do well. Plus, aside of Toll, this group’s balance sheets leave much to be desired. Cramer urged investors who want a play on housing to buy Home Depot instead.

No doubt Insana’s call was “compelling,” Cramer said, “but I am not as bullish as he is.”

“I am more defensive,” the Mad Money host continued, “less inclined to think that this market can take off, which is what would happen if Ron’s right.

Cramer’s charitable trust owns Bank of America, Bristol-Myers Squibb, Cisco Systems, Home Depot, JPMorgan Chase and Wells Fargo.

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