Upon looking at every stock in the S&P 500 index, Cramer found that just 21 stocks were strong going into earnings and remained strong afterwards. But because not all of them were worth buying, the "Mad Money" host offered his top five plays for a diversified momentum portfolio:
Of the top technology and Internet names, Cramer likes Jabil Circuit . The St. Petersburg, Fla.-based company assembles all things tech, including computing, storage, industrial, networking gear, telecommunications, mobile phone components and more. It's now focusing on its higher margin, faster-growing diversified manufacturing business, where it assembles industrial, clean technology and life sciences equipment.
Cramer recommended the stock on July 13 when it was trading at $14.71 a share. Since then, it's posted a gain of nearly 11 percent. Despite its recent rally, he thinks the stock is still cheap, trading at just 7 times next year’s earnings with a 12 percent long-term growth rate.
In the materials space, Cramer prefers Weyerhaeuser . The lumber and wood production company owns a lot of land and a homebuilding business, too. Cramer thinks there could be a shortage of homes in the U.S. by 2012, prompting a turn in the housing market that would benefit WY. He also likes Weyerhaeuser because it's in the process of converting into a real estate investment trust, which means it will likely pay a much larger dividend yield. It's currently at 1.1 percent.
Cramer's top energy play is Noble Energy . He interviewed CEO Charles Davidson on March 8 when the stock was trading at $72.98 and since then, the stock is up 18 percent. Although the Houston, Texas-based company is 36 percent into liquids, like oil and 64 percent natural gas, Cramer said it's shifting toward a 50-50 split. To obtain more oil, the basic materials company is drilling all over the world: onshore in the Rockies, offshore near Israel and West Africa and deepwater in the Gulf of Mexico. It's expanded production by a 10 percent compound annual growth rate through 2015 and even though it's currently at its 52-week high, Cramer thinks it has more room to run.
As far as industrial and defense names go, Cramer is going with Goodrich . He thinks the Charlotte, N.C.-based company will benefit from the product replacement cycle happening now in the aerospace industry. The cycle should drive multi-year gains in everything that goes into an airplane, including the landing gear, wheels and brakes made by Goodrich. Trading at 16 times next year's earnings, Cramer thinks this stock is priced right, especially since it's poised to grow earnings at a 20 percent clip in 2011 and 2012.
Finally, Cramer said WellPoint is the best momentum stock in health care. One of the largest health maintenance organizations, its stock took a beating while Congress debated health care reform. But Cramer thinks investors shouldn't worry about interference from Washington courtesy of the midterm elections on Nov. 2, where Republicans took control of the US House of Representatives and made gains in the Senate, as well. Investors can now focus on the company's earnings power, as it takes share while health care costs remain low.
Despite the company's double-digit earnings growth, Cramer said Wellpoint remains a relatively cheap stock, trading at 8.6 times 2010 earnings. With expectations of a $2 billion stock buyback program, Cramer thinks shares of Wellpoint could go to more than $60 a share and still be cheap.
When this post was published, Cramer's charitable trust owned Wellpoint and Weyerhaeuser.
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