(Click for video linked to a searchable transcript of this Mad Money segment)
Lately pro investors have been keeping a close watch on the IPO market in an attempt to generate outsized gains.
Although Jim Cramer is concerned that the quantity of these hot IPOs feels a little frothy, he also said, "You don't have to like that fact in order to recognize the pattern and profit from it."
And he added that many of the big gainers are coming out of the biotech sector. "Lately, we've seen tiny biotechs coming public and then skyrocket," Cramer added. "For example, , Ultragenyx, Revance Therapeutics, and Auspex all doubled in the days following their IPOs. And five other biotechs rallied anywhere from 34% to 90% following their offerings."
The next IPO that Cramer thinks could follow the pattern outlined above hits markets this week. It's MediWound, which is expected to price on Thurs., March 20, between $14 and $16."
"This is an Israeli biotech firm," Cramer said. "It makes a drug called NexoBrid that could transform the way in which burn victims are treated."
As groundbreaking as this and other potential new drugs may be, "the company doesn't expect to turn a profit until 2018, when NexoBrid comes up for FDA approval—that's a long way off," Cramer said.
Therefore, "I'm recommending this as a trade off of the IPO, not necessarily as a longer-term investment."
"I bet it will give you a nice pop on its first day of trading. I think the stock could quickly trade up to around $22," Cramer said. "However, if you get that pop, I want you to take profits. When it comes to these red hot biotech IPOs, we're flippers, not owners."
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Again, Cramer is recommending the stock for a trade and nothing more. That means, if you establish a position in this stock ahead of the IPO, you will need to sell quickly thereafter.
"And if you can't get in on the actual deal, then just say you missed it and move on," Cramer said.
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