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Your Portfolio’s Biggest Winner for 2010?

The US auto market is revving up, Cramer said Monday. At least that is what Ford’s most recent sales figures, up 42% in December, seem to indicate. That means inventories, which dwindled as both companies and consumers struggled through the recession, will need restocking to meet the demand. Cramer recommended Johnson Controls for investors looking to capitalize on the trend.

As much as he likes Ford and CEO Alan Mulally, who is responsible for the company’s miraculous turn, Cramer thinks the auto-parts makers are a better play right now. There are fewer of them, which makes for great scarcity value, and Cramer expects money managers to pile in and push up the group’s share prices.

“Portfolio managers want more exposure to the auto-parts companies,” Cramer said, “and that’s why they are going to send Johnson Controls soaring.”

See, big money managers like to mimic the S&P 500, but they’ll focus on the best-performing sectors in order to beat the benchmark index. It’s how they keep their jobs. So at any given time, certain groups of stocks are more popular than others because they offer the most upside. Right now the “in” clique is autos, specifically the parts makers, Cramer said, and hedge funds and mutual funds will be “overweight,” or heavily invested in, companies like Johnson Controls .

Cramer called JCI “the cheapest and most consistent performer in this group.” And the company – which earns its revenues from seating and interiors; auto batteries; heating, ventilation, air conditioning; and industrial controls – smartly slimmed down during the recession and used its strength to take market share. Now, thanks to a strong balance sheet and great customer relationships with Ford, Toyota Motor and others, Johnson Controls is “poised to be more profitable than ever,” Cramer said, as production starts up again.

JCI, earning just 42% of revenues from auto parts, is not a pure play on the industry, and as a result missed some of the moves enjoyed by its peers. But that gives investors a chance to buy the stock at a discount, and then ride the tide back up. Cramer said he was bullish on the company’s other two businesses – batteries and HVAC – so there’s more than one reason to like Johnson Controls.

JCI trades at less than 14 times 2011 earnings with a 14% growth rate. That’s cheap, even with the stock just a point from its 52-week high. There’s a good chance JCI will pass that level, though, as money managers scramble to get in. Cramer urged viewers to beat them to it.

“JCI could be the biggest winner in your portfolio for 2010,” Cramer said.

Cramer’s charitable trust owns Johnson Controls.

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