Medicare Bill Buys - Cramer's Mad Money (6/30/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday June 30.

Medicare Bill Buys: Kindred Healthcare (KND), Healthsouth (HLS)

With so much uncertainty in the market, there are few safe havens. However, Cramer thinks the upcoming Medicare bill will mean big money for certain companies. With the last spending increase, Kindred Healthcare and in-patient facility Healthsouth both bounced 16%. However, oxygen-and-dialysis providers were left out and saw their stock prices fall. Cramer called the bill “low-hanging medical fruit” and said he would devote the week giving investors an idea of where to pick. Cramer predicts healthcare will outperform every sector, with the exception of oil and gas; "Medicare is a huge, non-economically sensitive giveaway to a lot of companies," he said.

Fresenius (FMS), DaVita (DVA)

Dialysis companies will get a perk in the most recent Medicare Bill, which will give payment increases updated for inflation. Both Fresenius and DaVita, a duopoly which controls 65% of the market, will benefit, but Cramer favors FMS because it has international exposure and is vertically integrated, producing its own supplies. With the Chinese dialysis market expected to grow between 30% to 40% this year, Fresenius should see an upside. While Fresenius trades at a premium to its competitor, Cramer says it is a $65 stock disguised as a $54 stock, and he believes its earnings estimates are too low.

Too Low to Go: GM (GM), Ford (F)

While some speculators suggest bottom picking Ford and GM, Cramer says the automakers are so in debt, they are longer in control of their own destinies. Bondholders and not stockholders own the falling industry giants, and in spite of strong assets, GM’s book value is negative and Ford’s is zero. Cramer compared the companies to Bethlehem Steel in the 80s, a company which seemed invincible, but was brought down by pension, healthcare and bond obligations to the point where it could no longer issue common stock. Cramer wouldn’t touch GM or Ford, no matter how low they go.

CEO Interview: Glen Post CenturyTel (CTL)

Glen Post told Cramer that after an aggressive share buyback program, CenturyTel is increasing its dividend tenfold. The company has had a strong performance in the broadband internet space, but its stock price doesn’t adequately reflect the company’s success. Cramer is bullish on CentryTel; “Big dividend, buyback, growth,” he said. “Start buying.”

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