Investors should avoid buying stocks of second-tier consumer product companies such as Prestige Brands Holdings Inc. and Spectrum Brands Inc., Jim Cramer said on his ``Mad Money'' television program on CNBC.
These companies were created by private equity buyers who acquired seemingly unrelated products, such as fish food, electric razors and batteries, and cobbled them together as one company in hopes that consumers would be loyal to the original brand names, Cramer said.
``These companies are the equivalent of gourmet tater-tots,'' said Cramer, a market commentator and former hedge-fund manager. ``You're getting a company that makes second-rate, second-tier products.''
Spectrum Brands owns Rayovac Batteries, Remington shaving products and Repel insect repellent, among others. Prestige Brands has over-the-counter drugs, such as Chloraseptic, as well as household cleaning products, including Comet and Spic & Span.
Instead, investors should buy stocks of companies with so-called best-of-breed products, according to Cramer. He suggested Procter & Gamble and Johnson & Johnson.
Johnson & Johnson is also good to own for its medical products, Cramer said. Likewise, St. Jude Medical Inc. is a good stock to own, he said.
Cramer recommended Coca-Cola Co., EuroZinc Mining Corp., Intel Corp., Oracle Corp., PepsiCo Inc., Rentech Inc., Starbucks Corp. and Target Corp. in response to questions during the show's ``Lightning Round'' segment.
He also told viewers to avoid EnCana Corp., Lucent Technologies Inc., Massey Energy Co., National Beverage Corp., Nortel Networks Corp., RTI International Metals Inc., TravelZoo Inc. and Wal-Mart Stores Inc.