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Asia typhoon swipes at US stock

Friday, 6 Dec 2013 | 6:23 PM ET
Xoom in the penalty box?
Friday, 6 Dec 2013 | 6:25 PM ET
Mad Money host Jim Cramer shares why he thinks Western Digital is the best way to play the money transfer business. Xoom's growth may be intact but it is not yet a safe buy.

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

Jim Cramer always tells investors to know what you own. Otherwise you're vulnerable

And investors who hold Xoom indeed have found themselves vulnerable after shares tumbled precipitously from their October highs. "In the last six weeks or so, Xoom has been taken to the woodshed, falling more than $8 or 23%," Cramer said.

As a company that provides money transfers, you might think the decline was a sign that rivals Western Union and Moneygram were just getting more aggressive.

But that's not it.

"Nope it was a typhoon," Cramer explained.

In early November Typhoon Yolanda, an exceptionally powerful storm, devastated portions of Southeast Asia, most notably the Philippines. "The damage was immense," Cramer added.

Now here's the part where 'knowing what you own' comes in.

Super Typhoon Haiyan moves towards the Philippines
Getty Images
Super Typhoon Haiyan moves towards the Philippines

"You see, Xoom gets about 35% of its revenues from the Philippines," Cramer explained. "The typhoon seriously disrupted its business."

In other words, Xoom is not diversified.

Curious to learn more, Cramer also found "Xoom gets 70% of its total business from just three countries, the Philippines, India and Mexico."

In other words, Xoom is really not diversified.

Of course, as a shrewd investor, Cramer can't help but wonder whether the stock was oversold, especially if many investors didn't understand the catalyst behind the price action.

Cramer did a little more digging and found a lot to like about Xoom.

First, there's the business model. "Xoom lets you transfer money over the internet, either through their website or through Wal-Mart's website, and it even works on your phone," he said. "At rivals Western Union and Moneygram you have to go to their nearest location."

And, before the storm, metrics were impressive. "In the latest quarter, Xoom's revenues increased by 62%, their transaction value—the amount of money they transferred—was up 95%, and their active customers grew by 39%," Cramer said.

Also Cramer found growth potential impressive. "Xoom is still only in just 30 countries. They have a lot of room to keep expanding into new places."

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All told, Cramer believes Xoom may still represent opportunity, however because the business isn't terribly diversified he thinks it's best viewed as a spec play until the business diversifies more.

But don't pull the trigger too quickly. Cramer also says, "I think it will take them a couple of quarters before they can recover."

In the meantime, if you want a slow, steady, less risky money transfer stock for 2014, Cramer suggests Western Union.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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