[Beginning of Cramer's verbatim comments for this segment...]

Jim:        With the uncertainty of earnings season upon us... despite that great number from Alcoa, Inc. (AA) to kick it off... we want to own stocks that have already been vaccinated against that uncertainty... stocks that have already told you that earnings are better than anticipated... These are the closest things we have to certain winners, because no company pre-announces unless it knows it's going to do even better in the future... and they definitely don't pre-announce to the upside, if you think you're going to disappoint later on.

So tonight, I've got a healthcare stock that fits that bill... one that I think is "immunized" so to speak... not only on the earnings front... but also against the most negative farce in the history of health care, since Hillary Clinton!... Obamacare...

In fact, this company stands a strong chance of benefitting from it, even as its stock has been held back by the possibility of healthcare reform...

I'm talking about Covidien, Ltd. (COV)... the global healthcare company that was spun off from Tyco (TYC) back in 2007. Tyco was, at that point, the house of pain. Covidien was the house of pleasure...

Covidien is a healthcare products company with three segments: medical devices, the main one representing 58% of sales, where it makes endoscopic instruments, and monitoring and ventilation gear... pharmaceuticals, 25% of sales, makes both generic and branded drugs... we like the branded... along with contrast material and radial pharmaceuticals... and medical supplies, only 17% of sales. I don't want that to be any bigger, because it's mostly commoditized supplies like sharps safety and nursing products...

When you think health care, I want you from now on to think Covidien... even if I'm pretty sure that you've never heard of it until now...

When I say Covidien's been vaccinated against Obamacare, it doesn't make it risk free. No stock is risk free. The company has its hands in a lot of healthcare pots... medical devices, drugs, medical supplies... but the worst it's facing from the healthcare bill, written by Senator Max Baucus that's currently being debated, is a tax on the medical device side of its business. Now, that tax would obviously be passed directly onto consumers... kind of like the taxes on your phone bill... so I don't think it would meaningfully impact the company... but I like to disclose everything... and, according to Goldman Sachs, only 10% of Covidien's earnings are exposed to the Baucus plan, making this, the way I see it, one of the safest healthcare plays... or at least the safest from Washington... that's out there.

And the upside from healthcare reform is very real for this company...

I've been looking at this... waiting for this debate to get to this point... to give you a name...

Covidien has a nice variety of diagnostic and preventative medicine products... and my doctor... who had the chance to interview President Obama about health care in July... has told me over and over again that diagnostics are "king" in this administration, along with anything that eliminates waste in health care... that's why we do that Allscripts all the time. And everything he has said... has been backed up by facts on Doc.com on the CBS network of news sites...

He specifically has told me that endoscopic devices are what's going to benefit, and Covidien's got that totally covered.

This stock's been kept down by Obamacare but, if anything, it deserves a higher price-to-earnings multiple, based on its diagnostics and efficiency-improving products, which are favored by the president and by the healthcare bill.

I just don't like Covidien because it's immunized from Washington though. It's also a healthcare company that's doing all the right things, making lots of small tuck in acquisitions that are additive to earnings, and getting rid of its less profitable business lines, making it a leaner, meaner healthcare machine.

Covidien's latest acquisitions are very typical... Aspect Medical Systems, just announced... $200 million in cash... just literally less than a month ago... gives them a lot of brain imaging technology that compliments the company's existing medical devices. Aspect Medical's main product is a fantastic system... I've seen it work... that monitors brain activity to ensure that the patients are at the right level of unconsciousness for invasive procedures. That means more efficient health care. Look, the most crucial moment in an operation is whether you will come to or not, or whether the anesthesiologist got it wrong. Aspect gives the doc a few seconds more than they have, to make sure the patient's out, and to make sure can come back. That's the difference between life and death, by the way. Trust me on this.

Aspect is just one of multiple purchases Covidien has made, along with the way that it makes its ultimate life-saving healthcare company. All of these acquisitions are so smart. Yeah, this is the smart way to play healthcare reform, or frankly just to play healthcare period...

The company's well positioned to benefit from long term trends like obesity. It's got medical devices that handle single-incision laproscopic surgery, which allows for improved cosmetics, less scarring, reduced wound infections, reduced pain, and faster recovery times. It gets people out of the hospital faster... again, one of the main goals of Obama's healthcare reform.

This whole sector of stocks has been hammered down to levels that are just too cheap, and can't stay that way as soon as the healthcare debate is over. Again, why time this piece for tonight?... It's about to end, this debate... Oddly... and it doesn't really matter how the debate turns out... Covidien is trading at a discount to the already-discounted group... 13.1 times 2010 earnings... that's close to an entire multiple point to the average multiple for large cap medical tech companies... and an even larger discount to other hospital suppliers.

I don't get it...

This company's the best of breed and it sells more cheaply than the other stocks? That's nuts, considering that this $42 stock traded as high as $57 in September of last year, which was a 29% premium to the market. Do you notice how, if we gave you the same valuation as before, this stock would be selling at $52 without Obamacare. I think it can go there, after the smoke clears from this whole debate...

Here's the bottom line...

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The Bottom Line!:     Covidien, Ltd. (COV) is a healthcare company with all its shots... It's vaccinated against disappointing earnings, it's got its healthcare reform booster shot... Its diagnostic and cost savings products means it's got the healthcare technology that the President and Congress want. Remember, either way, as soon as this healthcare debate ends, I think these stocks are all going to fly, so you need a chit in this game... and the chit is COV, which deserves to trade at a premium to other healthcare plays, not a discount. And that's why I think Covidien is - to put it quite short and sweet - a buy, buy, buy!

[verbatim recap]

[end of segment]

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