Revisiting the Warsaw Pact Portfolio

When the U.S. economy is, for the most part, in the dumps, it’s smart to invest in foreign companies. But how do you decide which companies - and from which parts of the world - can yield the best gains?

Cramer, for one, has been a fan of Russia and Eastern Europe because of their commodity wealth. With oil, metal and mineral prices skyrocketing, it certainly makes sense to put your money where these things are in abundance. So on Tuesday’s show, he revisited his Warsaw Pact Portfolio from a few weeks ago.

The five stocks that made up this basket – Mechel , Wimm-Bill-Dann Foods , Central European Distribution , Central European Media and CTC Media – are up a collective 14%, compared to a relatively flat S&P in the same period. But Cramer made one mistake when he put this portfolio together: CTC Media.

CTCM and CETV are both media companies so they shouldn’t have both been included simply based on Cramer’s diversification edict.

He also blew it thinking that Russia’s commodity wealth would trickle all the way through to media. It did boost food and beverages through the consumer, helping Wimm-Bill-Dann and Central European Distribution. And it trickled down to infrastructure, thus the strength of Mechel, the steel maker. But media is, at its core, a luxury, not a necessity, so Cramer was wrong to think Russia’s oil and gas wealth would immediately be a boon for a company like CTCM.

But Cramer’s keeping the other media play, CETV, in the portfolio because it’s in a better spot to grow, with far more audience share in its markets. CTCM also overpaid on a big acquisition, which can be deadly move, especially in the medial world.

The bottom line is that Cramer’s Warsaw Pact Portfolio marches on, but CTCM gets the boot.

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