Cramer’s 6 recent IPOs with upside
After sifting through a myriad of recent initial public offerings, Jim Cramer said 6 look like attractive buys.
"At current levels, I like Antero Resources, Norwegian Cruise, Pinnacle Foods, Volaris, and Navigator Holdings. And I think Frank's International is a 'buy' into weakness."
First traded in October, Cramer called Antero Resources a natural gas play with tremendous growth. "In the most recent quarter, Antero grew production by 128%, and next year management thinks they can deliver another 75% increase."
Also Cramer believes the fortunes of energy companies lie directly with the acreage they own, and he likes the real estate held by Antero. "They have very high quality acreage in Ohio's Utica shale," he explained.
In addition, Cramer sees another catalyst. "They have a midstream business that management intends to spin-off as a master limited partnership in order to raise funds to finance more drilling."
All told, "This is an IPO that hasn't run too much and can still be bought. "
Norwegian Cruise Lines
"To me, Norwegian Cruise Lines is worth buying hand over fist," Cramer said.
First, "unlike the two giants of the industry Norwegian is a real growth company. Right now they have 12 ships, with three more vessels in the pipe that will grow their capacity by 40% over the next three years," noted Cramer.
Second, "Norwegian is the best operator in the industry with the highest margins, and the highest net revenue yield," Cramer added.
Third, "the company's been cleaning up its balance sheet.
Fourth the stock is cheap. "Currently its selling for 19 times next year's earnings with a 40% long-term growth rate."
With shares first hitting the market in March of this year, Cramer believes fundamentals line up well for Pinnacle Foods, a company that buys neglected brands and then breathes new life into them.
"For example, Pinnacle recently bought Wishbone foods from Unilever for $580 million, and the deal is already additive to their earnings," Cramer said. "This company has a winning formula along with terrific management. What more can you want?
Volaris, which IPO'd in September, is a low cost airline that's headquartered in Mexico. "It's kind of like the Spirit Airlines of Mexico," Cramer said.
And with Mexico's economy promising to explode over the next decade, Cramer thinks this airline may be in the sweet spot. "Volaris flies to many of the towns where the new plants are being built," he said.
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Also, "the company is growing like a weed—right now it has 43 planes, and management plans to more than double that, adding another 49 over the next eight years."
"Navigator Holdings transports liquefied petroleum gases like propane and butane, along with petrochemical gases like ethylene and propylene," Cramer explained.
"Right now Navigator has 23 Handysize ships, the smallest type of bulk carrier, with another 8 ships on order. I see real growth here," Cramer said
Also Cramer noted that "Navigator managed to stay profitable during the Great Recession."
On top of that, famed investors Wilbur Ross holds a sizable stake in the company, according to recent reports as much as 60.6 percent.
However, Cramer also added a word of caution. "39% of Navigator's vessels are on the spot market, so if for some reason the day rates for these ships plummet, the stock will get hammered. So there's some risk here, but I think it's worth the potential reward."
Frank's International, which made it's IPO in August, is essentially an oil services play; the company sells, "casing pipe and production tubing, two things that drillers can't do without," Cramer explained.
Although deepwater drillers need in enormous quantities of the company's products, the stock has stumbled recently after Frank's released earnings that showed third-quarter profit dropped from a year ago, hurt largely by higher operating costs.
"Also, Frank's had a key order pushed out to the first half of 2014, but they still recognized the expenses on that order, which caused their U.S. onshore margins to get crushed," Cramer explained.
However, on a relatively bullish note, the Mad Money host sees developments as one time issues.
"Frank's still has an enviable position in the industry—they're in a duopoly with Weatherford," explained Cramer. "I think the stock can work its way higher now that the expectations have been reset."
But don't pull the trigger quite yet; Cramer also added a word of caution. "One thing: there aren't many stocks that are down this year, and it's possible you could see some tax-loss selling by investors who bought Frank's into strength before it reported. So I think the best course here is to buy Frank's International into weakness. "
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