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Why Cramer Is Avoiding This Stock Now

Friday, 11 Jan 2013 | 5:25 PM ET
Playing Quiksilver's New CEO
Goldman Sachs upgraded Quiksilver from neutral to buy, but then Piper Jaffray downgraded the stock from buy to neutral. Mad Money host Jim Cramer explains how to play this speculative stock.

"When you're speculating, timing is everything," host Jim Cramer said on CNBC's "Mad Money w/Jim Cramer" Friday.

Take Quiksilver, for example. Shortly after the Huntington Beach, Calif.-based seller of adventure sports apparel recently announced it hired Andy Mooney to serve as CEO, Goldman Sachs upgraded the stock from 'neutral' to 'buy.'

"Goldman thinks he's exactly the right guy to execute a turnaround at Quiksilver, and I have to agree," Cramer said, noting Mooney has previously held leadership positions with several large companies with much success, including Nike and Walt Disney.

Apart from Mooney's strong track record, Goldman noted that retailers that hired CEOs from outside the company saw, on average, their stocks climb by 40 percent over the next 12 months. The problem with that argument, Cramer said, is that there's a major outperformer on the list – shares of Chico's FAS rallied 268 percent in the year after the retailer hired David Dyer as CEO. To Cramer, retail stocks just can't be lumped together. Turnarounds take time, he said, so it remains to be seen just what impact Mooney will have at Quiksilver.

Goldman's new CEO argument is somewhat persuasive, Cramer said, but investors should be concerned that Piper Jaffray downgraded Quiksilver from 'buy' to 'neutral' on Friday.

"We don't have holiday data from Quiksilver, but the major national specialty retailers in the same category have all given us updates and the numbers don't look good," Cramer said, adding that rival Pacific Sunwear recently reported disappointed gross margins while both Tilly's and Zumiez delivered a decline in same-store sales. "These are the companies that sell Quiksilver's merchandise, and they're telling us the category is having a real hard time."

CNBC

Meanwhile, Cramer pointed out that Quiksilver's stock has already had a major run. In less than a month, its stock has popped by more than 50 percent.

After analyzing both calls, Cramer said he just can't get behind Quiksilver's stock right now.

"I do believe that if anyone can pull off a turnaround at Quiksilver, new CEO Andy Mooney is the guy, but it will take time for him to put his stamp on the company and given the huge run in the stock over the last month, it would not be smart speculation to buy this one here," Cramer explained. "If anything, I'd ring the register given that the stock is only a few cents off of its highs."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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When this story was published, Cramer's charitable trust owned Nike.

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