3 best stock plays for the rest of 2011

Autos, energy and clothing offer the best ways to take advantage of a peak in commodities as we enter the second half of the year.

By Jim Cramer Jun 29, 2011 8:00AM

jim cramerthe streetWhen did we become so darned unimportant? When did we officially become an annex of Europe, trading with the worst of the worst, the lowest of the low -- Greece, Spain, Portugal and the like?

 

I think the answer is when we failed to create any jobs to speak of and became a suspect place in which to do business. It happened when our budget deficit became laughable, such that everyone knows that any other country with a balance sheet like ours would see its interest rates soar. I think we became this way once it was clear that China's tightening was more important than our loosening.

 

That's the bad news.

 

The good news is that with the sudden break in commodity inflation, we have a chance to create some wealth in the companies that export overseas and depend on emerging growth. That's because emerging-growth countries will stop being forced to slam on the brakes, as they have for most of this year.

Let's focus on three areas. The first is American companies with big businesses overseas. That's what brings me autos, specifically General Motors (GM). Here's a company that people got all excited about because of Chinese sales -- not American sales. But the company's IPO window coincided with the shutting of the cheap-money window in China. I expect that, by September, after this oil intervention, China will no longer be actively trying to slow down its economy. That means GM can start selling many more cars. It is a huge swing factor, and the base in the stock is showing you that's what's to come.

 

Other companies like Cummins (CMO), Caterpillar (CAT), Joy Global (JOYC) and Freeport (FCX) can be winners. Heaven knows they've been crushed. But it is GM that I think does the best in this environment.

 

The second cohort is companies that can supply energy to markets that repatriate dollars. I had thought that coal would begin to do better because of Japan's newfound and justifiable antipathy toward nuclear power. But the country is shel lshocked; it hasn't adjusted to the new world yet. That will happen in the second half, and a beaten-up company like Peabody (BTU) will be the best way to play it.

 

The third area? If commodity inflation has peaked, as I think it has, you want to do something with apparel. These companies need oil to come down so shoppers do better and cotton to come down so raw costs are much lower. You want ones that are international in basis and not just domestic, because our economy will still not be strong enough.

My two favorites are Phillips-Van Heusen (PVH), because of Tommy Hilfiger and Calvin Klein -- huge brands overseas that were able to put through monster price hikes -- and Jones Group (JNY), which just bought Kurt Geiger, a very important international brand that nobody seems to care about. If you are going to sell luxury brands, you have to sell them internationally, and this U.K. footwear outfit makes Jones more of an international player, like VF Corp. (VFC) and PVH.

 

Jones has been hobbled by rising raw costs, but now that those have peaked -- and the balance sheet is in terrific shape while shares are in the doghouse -- you have what may turn out to be the best of all the second-half plays in the industry.

 

At the time of publication, Cramer was long GM, CMO, CAT and FCX.

 

Jim Cramer is a co-founder and the chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

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8Comments
Jun 29, 2011 10:46AM
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Angry GM, Government Motors, the ones that screwed their prior bond and stockholders by paying the unions ridiculous wages while they made crappy cars. No frick'n way Jose. There's a list of stocks that I'll forever never own and it includes AIG, BOA, C, GS and GM; all of which should have been put out of business instead of being propped up with taxpayers money while those same taxpayers have been screwed by the FED with zero percent interest rates for the last 3 years. Party
Jun 29, 2011 10:15AM
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GM? really?  I wouldn't put monopoly money in that stock.  UAW and the government run that company not for profit but for employee benefits.

You keep repeating the same babel.  People need stable jobs, oil prices don't effect consumers in the way you keep foreshadowing.  If a person has a real job they will NEED a shirt to go to work, if they are sitting at home on the sofa, why would they need to buy nice cloths?  

Coal in Japan, you talk like they can just throw up a power plant like a strip center and start buying coal.   

I feel sorry for people who use your advice.
Jun 29, 2011 10:40AM
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Really?  What about WFT that you touted so consistently?  It has been a piss-poor performer, almost any other choice in the oilfield service space would have been better.  You got paid by the CEO that was on the show, right?  Will you disclose that?

 

Jun 29, 2011 12:14PM
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I don't think commodity inflation is over by any means, but I like most of Cramer's picks.  I already own CAT, JOYG and FCX. 
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For any author to write a column on this site, they must have balls of steel or someone that reads the articles for them and gives them feedback.  I would not want to be an author in this tough crowd and have to read what people give as feedback.

wooh!

Jun 29, 2011 9:43AM
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Thanks knuckle head, I just got some puts on all three stocks.
Jun 29, 2011 11:17AM
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The o.p.o.c. engine will produce 300 hp and get close to 100 mpg. China has purchased the rights to use this engine so I don't see why they would want anything from any American auto maker when they can produce a car that is both cheaper and more efficient. As usual we will set on our DONKEY and let china undercut what we could already be doing. This is also very typical of our L E A D E R S in both government and big business.
Jun 29, 2011 11:43AM
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The only reason Cramer gets any print and others to read his poo is that he is the most shameless and unabashed self promoter of these days, and even worse than Donald Trump, Michelle Bachman and Larry Kudlow. and everyone knows those three are as about as low as a snake's belly.

 

Cramer gets continually and brutally beat up every day by nearly everyone who sees his opinions, but his elephant-thick skin allows him to laugh it off all the way to the bank. Even though I cannot stand his PT Barnum level of self promotion, I almost wish I were more like him in his supreme ability to ignore insults that are more than often deserved.

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