As investors have flocked to industrials stocks like Caterpillar (CAT: 69.75 +0.50%) and United Technologies (UTX: 71.10 -0.07%) in recent weeks, Cramer’s CANDIES stocks have underperformed the S&P 500. In fact, Chipotle is the only stock to have outperformed the S&P 500 index since Cramer announced this list of CANDIES stocks on June 3rd.

Cramer is still very committed to these seven stocks and believes they are resilient enough to bounce back from their recent subpar performance. On yesterday’s Mad Money show, Cramer reviewed the earnings performances from the five CANDIES stocks have reported so far.

Chipotle
Cramer called Chipotle’s second quarter results “absurdly unbelievable”. Rising Same-store sales (SSS) and a phenomenal growth rate has this stock primed for further gains.

Apple
Apple reported an “insanely great beat” driven by strong Mac, iPod and iPhone sales. Even in Europe, Apple saw sales jump 66% despite many people writing off Europe as a “challenged area”.

Deckers
Deckers reported earnings that were $.13 above Wall Street’s expectations driven by a 34% growth in revenues. Cramer believes this demonstrates that the bull market is alive and well in the shoe sector.

Intuitive Surgical
ISRG reported similar strong growth with revenues up 34% and earnings $.15 higher than the Street was expecting.

Netflix
The one CANDIES stock that disappointed investors was Netflix. However, Cramer believes that investors over-reacted to NFLX’s earnings. “’m standing by it because of its stable and growing subscription business” said Cramer.

Netflix did beat consensus estimates and raised their guidance, but they also reported a 7% decline in revenue per customer. Cramer believes that Wall Street analysts are too focused on the declining revenue per customer at Netflix and ignoring its fabulous subscription growth. The number of Netflix subscribers reached 15 million this quarter, and increase of 42% from last year.

While Bernanke painted a fairly grim picture as he testified before Congress yesterday, former hedge fund manager Jim Cramer gave investors a more optimistic view on his Mad Money show.

Here are 10 positive signs for stocks that investors should be aware of:

1. China
The Baltic Freight Index has been up for three straight days after being down for months. This has been driven by increasing demand from China which seems to be experiencing a soft landing.

2. Brazil
It seems that almost every company is talking about Brazil on their conference calls. The Latin American country is becoming a serious player in the global economy.

3. Europe
One early surprise this earnings season is that the euro hasn’t dragged down quarterly results. The euro is now in recovery mode and European banks like Banco Santander [(STD: 12.77 -2.82%) are much stronger than they appeared just a few weeks ago.

4. Financial regulation
The uncertainty surrounding the financial reform bill is now over. Yesterday, President Obama signed the bill into law and so now financial firms can begin evaluating the impact.

5. Gridlock in Washington
After passing massive reforms to the healthcare and financial systems, the Democratic-controlled Congress is likely to face more gridlocks in the future. The American public has expressed their dissatisfaction with President Obama and Congress and it is unlikely that Democrats will be successful in the November elections.

6. Bernanke
Interest rates are extremely low courtesy of Fed Chairman Ben Bernanke. He is aggressively working to get America out of its current economic doldrums.

7. Strong earnings
We have seen several strong earnings reports particularly from tech stocks like Apple (AAPL: 257.25 -0.33%) and Qualcomm (QCOM: 38.08 -1.81%), but also from 3M (MMM: 85.54 -0.93%), United Technologies (UTX: 71.10 -0.07%), and Eaton (ETN: 78.46 +1.30%).

8. Cheap Valuations
Stock valuations are very cheap right now, especially when compared to the minimal rates you get from owning bonds right now. Cramer believes that stock valuations are the lowest that he has seen in 30 years of investing.

9. Investor sentiment
Investor sentiment has been so bearish recently…it can only improve from here. That means that a lot of market sellers can be converted to buyers which will lift the market higher.

10. Long-term Stock Charts
The big gains experienced by the markets last year are getting ready to drop off the long-term stock charts. This will make the current market levels look much more attractive which could make many technical analysts much more bullish.

Nvidia
Nvidia shares have fallen over 41% in 2010. The company supplies chips that power netbooks, laptops and smartphones. They also make semiconductors that power Adobe’s (ADBE: 28.72 +0.07%) PowerSuite 5. Nvidia’s stock has been hammered this year, but Cramer predicts the stock will be one of the top gainers in the second half of the year.

Jabil Circuit
Jabil Circuit continues to report double-digit growth, but the stock has fallen 15% this year. The falling euro has negatively impacted the stock which has substantial European exposure. However, Jabil trades at only 7x consensus 2001 EPS. Wall Street expects revenues to grow 15% this year and 18% next year. With such a compelling valuation, Cramer recommends that investors buy the stock.

The financial reform bill has certainly caused some consternation among the financial stocks. Wall Street always hates uncertainty and the ambiguity of the 2,000 pages of the financial reform bill has caused plenty of it.

Yesterday, the Dow close down 268 points in what Jim Cramer described as a “horrible, stinking bad day” that was reminiscent of “Stalingrad or Verdun.” Well, maybe not quite that bad.

After looking at the carnage of the financial sector there is one stock that Cramer feels offers investors lots of upside.

Cramer describes Citigroup (C: 4.10 -0.49%) as a “pitiful giant”. The stock has suffered from a mishandled attempt by the Treasury to sell their stake in Citi. These strong selling pressures have pushed Citi’s stock price down and there’s more still to come.

However, on a technical basis it appears that Citi is oversold. The Street.com technical analyst Tim Collins believes that the current prices provide a good entry point. He predicts that the stock could rise to $4.60 – $5.00 in the short term.

Cramer is even more positive on the fundamentals. He has faith in CEO Vikram Pandit and likes the firm’s mix of domestic and international business. Most importantly, Cramer believes that Citi has little exposure to housing which is once again become a huge problem area.

Cramer set a $12 price target for Citigroup over the long term. He recommends that investors buy Citi at its current levels.

Cramer pointed out that the earnings estimates for all of seven the CANDIES stocks have increased 30 – 50% year/year. The only exception was Deckers (DECK: 50.89 +1.60%), which only increased by 15%. However, Cramer says “the analysts are wrong” about Deckers, and the stock is up 118% since last year.

A review of the seven CANDIES stocks:

C – Chipotle Mexican Grill (CMG: 147.90 +1.29%)

A – Apple (AAPL: 257.25 -0.33%)

N – Netflix (NFLX: 102.55 +4.62%)

D – Deckers (DECK: 50.89 +1.60%)

I – Intuitive Surgical (ISRG: 328.37 +0.34%)

E – Express Scripts (ESRX: 45.18 +1.16%)

S – Salesforce.com (CRM: 98.95 +1.19%)

On the other end of the spectrum is Research in Motion (RIMM: 57.53 +3.29%). This was formerly one of Cramer’s favorite picks, but stock has been delivering disappointing earnings growth. As a result RIMM shares are down 24%, but Cramer still doesn’t think the stock is cheap. Most Wall Street analysts agree and are suggesting that the stock price will go even lower.

It seems like Research in Motion may be the next Nokia (NOK: 9.51 +3.15%) or Motorola (MOT: 7.49 -1.58%). Both stocks have substantial declines in earnings momentum and as a result they are now trading near their 52-week lows. Research in Motion is losing market share to Apple (AAPL: 257.25 -0.33%) and doesn’t seem to have any product on the horizon to compete effectively with the iphone.

“It has gotten way too gloomy around here,” said Jim Cramer on his CNBC Mad Money show. However, Cramer said that Union Pacific (UNP: 74.67 +0.43%) is one stock that is “good and getting better.”

The railroad stock has benefited from recent bullish comments by CEO James Young. Mr. Young stated that the outlook for UNP was strong given that carloads are up 17% for the quarter so far, and pricing has risen 3.5%. All six of Union Pacific’s businesses have seen volume growth from the end of the second quarter up to now.

The railroad is also expecting more price increases in the second half of the year and is already ramping up for the expected demand increases. The company has rehired 2,000 former workers. And the outlook at the railroad is much cheerier than last year when the firm laid off over 3,000 workers.

This success from Union Pacific has surprised some investors, since railroad stocks generally only perform well when the economy is humming along nicely. However, Union Pacific’s CFO said the company is taking business away from their trucking competitors.

With a P/E multiple of 13 and a 12% growth rate, Cramer believes that Union Pacific is cheap and recommends investors jump aboard the train before it leaves the station.

It seems that the bad news has been capturing all of the headlines of late. Former hedge fund manager, Jim Cramer pointed out yesterday that good news from several great American companies have been seemingly ignored by investors.

Nike (NKE: 73.64 +0.15%)
The shoe maker reported this week that they have “never been more profitable”. NKE had record cash flows of $2.8 billion and earnings that were $.12 above Wall Streets estimates. Yet the stock dropped 4% following the earnings report.

Bed Bath and Beyond (BBBY: 37.88 +1.47%)
BBBY shares dropped over 5% yesterday despite a 53% improvement in earnings per share and a 40% increase in gross margins.

Adobe Systems (ADBE: 28.72 +0.07%)
The tech giant reported a 34% growth in revenues on Tuesday. The next day the stock dropped over 7%.

Darden Restaurants (DRI: 41.89 -0.19%)
The owner of Red Lobster and Olive Garden reported earnings that were below Wall Street’s expectations, but did maintain their full year guidance.

Jabil Circuit (JBL: 14.51 -1.49%) and CarMax (KMX: 21.10 +1.01%) also reported bullish data, but their stocks dropped.

Cramer feels that all 6 of these companies are great American stocks to consider. They all have impressive fundamentals which should lead their stocks higher when a rally begins. For now though, Cramer recommends waiting for the market to stabilize before buying these stocks.

This week, the most visible economic report showed new home sales plunging 33% to only 300,000. This number was much worse than the anticipated 400,000 home sales. However, Jim Cramer said on yesterday’s Mad Money show that investors should have been expecting this big drop.

Housing related stocks have been punished over the past few months. The markets seemed to be pricing in an expected fall off in home sales when the federal tax cut expired. However, this week’s housing report send the stocks even lower. Too low in Cramer’s opinion! Cramer would be buying right now since housing is so out of favor. Of course, Cramer is bullish on housing long-term and even has predicted a housing shortage by 2012.

Cramer recommends that investors revisit these housing stocks and even speculated that housing stocks could double from their current levels.

Lowe’s (LOW: 20.74 +1.27%) – Cramer has hated this stock in the past, but he thinks its drop from $28 to $21 makes it attractive.

Fortune Brands (FO: 43.88 +1.15%) – Similar to LOW, the decline from $54 to $42 in FO’s stock price makes it too cheap to pass up.

Toll Brothers (TOL: 17.36 +1.64%) – The last time TOL’s stock price was at $17, management was saying that business was “hideous”. Now management is simply stating that business is “light”.

Cramer believes that investors will soon recognize how attractive these housing stocks are. Once that happens, it will push their stock prices much higher. Many of these same investors were down on auto stocks following the expiration of the cash for clunkers program. However, Cramer recommended that investors buy Ford (F: 12.77 -1.54%) at that time and since then the stock has doubled. Could housing stocks be the next to double?

Given the tremendous increase in Apple’s (AAPL: 257.25 -0.33%) stock price, many analysts are nowwondering if Apple stock has become expensive. However, others claim that AAPL shares are cheap based on the furious earnings growth experienced by the company.

Yesterday, Deutsche Bank (DB: 70.24 +0.31%) increased their earnings estimates and price target for Apple. Just a few months ago, they expected Apple $13 a share. Now with the release of iPhone 4 and the iPad, Apple is expected to earn $18 per share.

These earnings increases has resulted in Apple becoming an “accidently cheap stock” according to Mad Money host Jim Cramer. He believes that Wall Street analysts have consistently underestimated Apple. Piper Jaffray (PJC: 31.19 -1.86%) had originally estimated that Apple would only sell 900,000 iPads by June. S.C. Bernstein had estimated much higher, but still only predicted 2M iPad sales. Of course Apple just announced that they have already sold 3M iPads.

Cramer likes that fact that analysts are increasing their estimates for Apple, but thinks Deutsche Bank’s estimates may still be too low. Cramer predicts that the tech giant could earn $19 per share. That would mean that Apple only trades at a multiple of 14x earnings and could result in significant upside in the share price.

Here is a review of the performance of Jim Cramer’s key stock picks from Tuesday’s Mad Money show.

Security Stocks
American Science & Engineering (ASEI: 79.18 +0.23%) stock soared 5.8% after Cramer discussed Homeland Security as one of his key investing themes for 2010. ASEI manufactures X-ray equipment for the U.S. government. Cramer sees tremendous potential in ASEI’s products and believes the company has the opportunity to grow their current revenue levels by 10x.

Cramer also highlighted OSI Systems (OSIS: 27.79 -1.03%) as another potential play on Homeland Security. OSIS’s shares closed up 2.6%.

Ford Motor (F: 12.77 -1.54%)
Ford’s stock jumped 3.7% following yesterday’s report that vehicle sales increase 33% in December. While General Motors remained the leader in overall vehicle sales, Cramer warned GM that they had better watch out for Ford which is quickly closing the gap.

Nice Systems (NICE: 28.67 +0.92%)
Shares in Israeli security firm Nice Systems gained 4.5% after Jim Cramer advised investors that the stock represented a great buying opportunity. At its current valuation multiple of only 18x earnings, Cramer believes the stock is a great value.

Cramer’s Lightning Round stock picks:

• Microsoft(MSFT: 25.81 -0.85%) dropped 0.6% – Despite Cramer offering a $35 price target on the stock that currently trades for less than $31.

• Pepsico [[PEP] fell 1.0% – Despite Cramer advising investors to buy the stock “aggressively”.

• Dow Chemical (DOW: 27.33 +0.22%) rose 1.8% – While Cramer believes they overpaid to acquire Rohm & Haas, he believes the company deserves credit for their execution since.