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Cramer: Jazz Up the Portfolio?

(Click for video linked to a searchable transcript of this Mad Money segment)

With its cheap multiple and serious upside potential, Cramer thinks this stock could give your portfolio a kick.

"I'm talking about Jazz Pharmaceuticals," Cramer said, "a speculative $4 billion biopharma company."

Cramer said that although the stock has already gained 15% in the last month, he still thinks it's cheap. "Despite that gain, Jazz still sells for just 9 times next year's earnings estimates, yet it has a 16% long-term growth rate."

Of course the natural question is - why does Jazz have such a cheap multiple? Cramer's parsed through the research and he's found that Jazz has a dark cloud hanging over it.

"The company gets 69% of its sales from a narcolepsy drug called Xyrem. Although the patent doesn't expire until 2019 a rival company, Roxane Labs, is developing what equates to a generic version," Cramer said.

"This is something that terrifies investors, because if generic Xyrem hits the market, then more than half of Jazz's revenues will be at risk," added Cramer.

Carlos Davila | Photographer's Choice | Getty Images

Although Cramer doesn't typically advocate betting on litigation, this stock is an exception. Cramer is a law school graduate and after looking at the issue through the prism of the courts; he believes Jazz has a strong case.

And if the issue is resolved favorably for Jazz, the Mad Money host thinks shares could trade at much higher multiple.

"If Jazz simply traded in-line with other, similar biopharma names, then this $68 stock would go to $85, that's another 24% higher than where it's trading right now," Cramer said.

But that's not the only catalyst – Cramer also sees other reasons for shares to march higher.

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"The company also has an oncology franchise and a psychiatric franchise. Within oncology, Jazz recently acquired a drug called Erwinaze, a leukemia treatment, which should generate $150 to $175 million in sales this year," Cramer said. On the psychiatric side, Jazz has a pair of smaller drugs that are also effective."

"In addition, Jazz is developing a treatment for Graft versus Host disease, where the body rejects tissue that's been transplanted from another person, especially bone marrow," added Cramer.

All told, Cramer thinks the risk is worth the reward – however, he also thinks investors should establish a position slowly.

"This is a speculative company, and if you're going to speculate wisely you should wait for Jazz to pull back before you start buying," he said. "Again it's up 15% in only a month. I like the story, but that's no reason to chase."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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