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Small cap stock with big prospects

Jim Cramer believes that a small portion of your portfolio should be dedicated to speculation. This is why.

"Just take a look at Sangamo Biosciences," said the "Mad Money" host.

During a period when many stocks struggled to advance at all, shares of Sangamo have surged; they're up about 65% year to date. Over the same period the S&P 500 is up less than 2%.

"Who wouldn't love to have that kind of winner in their portfolio, right now?" mused Cramer.


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Although Cramer realizes that so-called spec stocks present higher risk, he also believes if you do thorough homework or research, you'll have a good chance of identifying a solid company with strong tailwinds.

That certainly would have been the case with Sangamo Bioscinces; had you done research late last year you would have found that this company sits at the very forefront of DNA based medicine.

"They're working on therapies that can treat diseases by physically changing your DNA, including a genetic therapy for HIV that's in phase two clinical trials that could potentially be a functional cure," Cramer explained.

Also, "The company is developing treatments for blood disorders like hemophilia and sickle cell anemia, as well as a group of rare orphan diseases known as Lysosomal storage disease," Cramer added.

Over the first few months of 2014, you would have also discovered that the medical community had become fairly impressed.

"The first clinical study of Sangamo's genome editing technology in humans was recently published in the New England Journal of Medicine. That's a a major validation of the platform.," explained Cramer.

All told, thorough homework would have uncovered these catalysts and led you to a profitable spec stock.

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In fact thorough homework did uncover these catalysts.

Cramer got behind the stock about 11 months ago. "Since that time, shares have generated 151%," Cramer added. (If you've been holding the stock since that time, Cramer suggests ringing the register on at least half of your position, not because he's concerned about the prospects; but because he believes in selling into strength.)

And, as you deploy capital going forward, Cramer suggests ripping a page out of the Sangamo Bioscinces playbook. That is, if you do your homework and you find a small cap stock with big catalysts, the reward may be well worth the risk.

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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