Mad Money

Cramer: Besides Bullion, My Top 3 Gold Plays

Cramer expects gold to be a big theme in 2010, and these are his stocks to play it.

VIDEO0:0000:00
Gold Digger?

Remember, he recommended this precious metal because it both protects against inflation and market volatility and has turned into a growth investment in its own right. Gold prices rose 23% in 2009, and the continued demand should propel them even higher. While Cramer thinks buying bullion, preferably through an exchange-traded fund like SPDR Gold Shares, is the best gold play, he did offer up a few of his other favorite picks.

Freeport-McMoRan may earn just 20% of its revenues from gold, Cramer, but the company is still the sixth-largest producer in the world. The bulk of Freeport’s business is copper, where it’s ranked number two and operates an Indonesian mine that’s just a short boat ride from China. Chine is, of course, the source of much of the world’s copper demand, and it helped to deliver a 73-cent earnings beat last quarter. Freeport also reinstated its dividend, though at a lower level.

For a pure play on gold, Cramer suggested Eldorado . He’s a bit wary of recommending companies over the bullion because companies can disappoint regardless of the commodity’s high price. But EGO is one of the lowest-cost producers in the business – an expected $330 an ounce for 2010, while Friday’s closing price was over $1,100 – leaving it some wiggle room. The stock has soared 87% since Cramer’s Feb. 25, 2009, call, and he thinks there’s plenty of upside left.

Investors may want to speculate on this sector, and Cramer doesn’t have a problem with that. It’s just a matter of how they do it. Instead of buying an individual company, he said he’d rather see people in the Market Vectors Junior Gold Miners exchange-traded fund. This ETF is a basket of 38 small- and medium-sized gold and silver miners that offer more growth than bigger gold companies. And it reduces the chances of losing big money if just one of them has a bad quarter – or year, for that matter.

Viewers can pick and choose from his recommendations to suit, Cramer said, but 10% of a portfolio should be in gold.

“The world’s too dangerous a place to have any less than that,” he said, “and the profits, in no matter what form you own it, are just too golden to pass up.”

Call Cramer: 1-800-743-CNBC

Questions for Cramer?

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