JJC:   Another completely and utterly, totally nightmarish day... Another day that shook people's confidences... made them feel like the market can't rally to save its life, but it really can... We know it... Because they even took apart the best stocks in the market, the oil and gas stocks or anything animal vegetable or, of course, mineral...

The market reacted to an extremely negative Merrill Lynch call on General Motors (GM)... sell sell sell... which said basically what we said the other night... that the bond bullies are in charge there, not the equity holders... I reiterate, you cannot own that stock...

Investors shuddered today over a call you have shuddered about two days... This selloff is vicious, it's ugly and it's all about worries of a global slowdown that should hit steel, coal, oil, gas... And I've got to be very honest... this selloff is not done.

When we get these moments, what do we do?...

We hunker down, we look for special situations without economic sensitivity, or minimal economic sensitivity... We raise some cash by letting go of some of our huge winners in oil and gas, in copper in coal... Yes, I know, intraday they reversed, you're going to say to yourself, wait a second, I missed the top, I'm waiting... No, sell some tomorrow... Why?... Because we're going to ready ourselves for lower prices so we can start all over again.

We get more conservative here... we ring the register... We be sure that we have side lines capital... We counsel against greed... hogs get slaughtered... If you're up huge in some stocks, you do not have the gains yet, you don't have the gains until you take something off of the table... Do not fear the tax man... The market is coming in... Now this does include some of the more volatile energy names that we have made lots of money in... I sense that we can buy them lower later.  If you can take that pain, fine... I like the Novocain.

In short, if we're going to buy anything, we need to be sure it doesn't have any economic exposure right now and if it has any economic exposure, you can pretty much be sure it's going to be crushed... We're not in the falling knives business... Never confuse yourself with a butcher block...

So tonight, we've got to pull-in-our-horns names, and we look at some conservative stocks that make great sense to cycle into after you've taken some of the gains. If you haven't taken any of the gains, it won't matter... and you'll look at me and you'll say, why didn't you tell me to sell some of these stocks that I'm up so much on... Why didn't he tell me?... And the answer is, I did...

I don't care if you miss the exact top that we had in some of these stocks, particularly the top that was between 9:30am and 10:30am... I want you to bring in some of the winnings and pick at the non-economically sensitive names for a change, or accept the fact that you're going to lose some money for a week, okay?... Because when we have these reversals, they're not over in a day.

This is exactly why all week I've been focusing on the proposed Medicare bill... Because it looks like it could be chock full of money for companies in a non-economic sense... Fresenius Medical (FMS), Allscripts Healthcare Solutions Inc. (MDRX)...  In a roundabout way, ResMed Inc. (RMD)...

And these healthcare stocks have started to behave well, because they don't need the rest of the world to do well... They don't care about that ECB, the European interest rate hike, they don't care about whether the consumers not spending... They don't need any of that to excel.

But there's another reason I like to look at stocks that feed at the federal trough. And that's because I don't think the big money guys, who are panicking right now out of fertilizer, out of railroads, and out of minerals and out of steels... I don't think they're paying any attention to what is going on in Washington. Any company that's likely to get more money because of legislation and congress is a company whose stock I think you can get an edge on, because I really believe that, on Wall Street, they only read the business sections, okay, maybe the sports pages... but then they throw out the rest of the paper... The Street usually doesn't factor in the importance of Washington until it finally hits the company's earnings... And as far as I'm concerned, that's way too late in this game... Which is why I'm telling you who's benefitting from the feds now, so you can get in ahead of the big money guys who consistently underestimate these stocks... something, by the way, that I talk about in the classic, Jim Cramer's Real Money: Sane Investing In An Insane World...  how's that for shameless promotion on a bad day?...

Anyway, my next pick that could benefit from the proposed Medicare bill is a company that frankly, doesn't make any money at all from Medicare... But nevertheless, Medicare reimbursement rates... what Medicare pays for services... is hugely important to this next company...

And the company is Pediatrix Medical Group, Inc. (PDX), and it manages the largest group of neonatal, newborn specialists in the country...

The company acquires independent practices, takes over all their management, contracting back office functions... They're the number one service provider to neonatologists in the country... That's a $2-3 billion market, that, by the way, does not get hit because coal prices went down... does not get hit because we are seeing a situation where Europe is slowing...

This company manages 22% of the 1078 neonatal intensive care units, they're called NICU's...

The stock is about 3 points above its 52-week low, we like that right?... It's the ones that are really coming down right now are the ones that are 3 points away from their 52-week high... I think this one is so low because the Street doesn't understand its business or what the Medicare bill could mean to this company.

So how exactly does Medicare, which is for the elderly and disabled, matter to a company that's treating newborn babies?...

And the answer is Medicare is the catalyst here for an otherwise great story...

The amount of pay increases that Congress gives to doctors for Medicare historically sets the benchmark pricing for PDX's physician contracts...  It doesn't matter that PDX gets no money from the feds... Because the amount it can charge for its Medicaid and commercial medicine services will be partially influenced by the proposed Medicare bill, and it could lead to a 1.1% pay increase for doctors in 2009... There's been little to no pay increases for years here...

Typically Medicaid... which is the one we're worried about here... pays roughly 55-56% of what Medicare does... And commercial payers pay 2 to 3 times what Medicare does, which is why I think the possible increase in pay in the Medicare bill matters to PDX.

Now Wall Street doesn't understand this at all, okay?... And I am telling you that you now have the edge... That's the kicker... How about, that's the short term catalyst... that even in this horrible market works...

Let me give you the real story, though, about why we would recommend this stock away from Medicare, and not just the fact that the economy is just so, so bad right now...

It's a long-term secular growth trend... seemingly immune to the miserable economy... The growing number of babies that need to go to neonatal intensive care units, because they're sick, or born prematurely or way too little... Any number of different problems... PDX thinks that close to 12% of all births in 2006 required admittance to a neonatal intensive care unit... And that number is only projected to go higher, thanks to increasing interventions in pregnancies like induced labor and c-sections, older mothers giving birth, increased use of fertility drugs... the increased number of diabetic expecting numbers...  wave of diabetes, remember?...

Now, the Street has hammered this stock, I mean they just really crushed it... It's gone from $70 in May to $48 and change right now...   We like that!  It's already had its selloff. PDX missed its quarterly earnings by 2 cents... lowered its 2nd quarter guidance by 5-10%. That's been a big part of the stock's fall. But I think another reason is the Street thinks there will be fewer births, thanks to the recession... All right... actually, the birth rates could fluctuate over time... But what the Street is missing is that the number of babies needing to go to neonatal intensive care units has been growing, and it seems to continue to increase every year, regardless of the economy... and that's what moves PDX.

The company also is expanding into services for anesthesiologists... a $15-20 billion market. This is something that's held back its earnings, but I think should be better for the numbers in the second half of the year... not in the stock...

I think the earnings miss has taken the fluff out of the stock... but the long-term and short-term have actually brightened since the disappointing quarter...

How much is it worth?...

Worst-case scenario, I think it grows earnings at 13% for 2008. The Street's expecting 8%. I think, given that, the stock deserves a 17x price-to-earnings multiple. That should send PDX up to $62. That's 28% higher than today's closing price.

Remember, we don't need the rest of the world... Remember, we don't need the Fed... Remember, we don't need the ECB... Remember, we don't need oil to go up or down...
 

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