A Speculative Soda Play
Today is speculation Friday – a day when Cramer recommends a lesser-known company that he thinks could make you mad money. Some time ago, he picked Hansen , a soda company that went from a measly 13 cents to $38, where it trades now. Now that’s some speculation that everyone would want a piece of. Keeping with the soda theme, Cramer’s got a new pick – one that’s he has discussed recently on the show – but wants to really delve into today. The pick is Jones Soda , and Cramer thinks it has a good chance of following in Hansen’s footsteps even though some of the fundamentals are different.
Now, Jones is not a Hansen clone. If you look at the chart, chances are you’ll say you missed the boat. The stock has already gone from 81 cents to $20, although it has pulled back today. Since Cramer starting mentioning Jones – which was brought to his attention by his daughter, who loved the company’s personalized soda bottles – the stock has doubled. Now you must be convinced you missed the boat. But Hansen had more than a couple doubles, and if you sold after the first one of those, you would have missed most of the action.
Let’s start with the similarities between Hansen and Jones. They both are in an alternative beverage market that, Cramer thinks, is targeted to a younger demo. And younger demos often equate to brand loyalty. Both companies grew out of the Western U.S. and have western-centric markets. And both HANS and JSDA were up big when Cramer first started talking about them. Hansen was very lightly covered by analysts in the beginning, Cramer says. Before 2005, it only had two analysts covering it. Then it went up to six. Right now, there are only three analysts on Jones. The coverage isn’t all that comprehensive, he says, but it’s likely to get broader as the stock goes higher.
They sound like carbon copies, right? Well, Cramer is a skeptic, especially when he’s speculating. Whenever anyone says they know the next big thing, your first reaction should be to look for evidence that proves it isn’t, he says. For instance, much of Hansen’s success can be attributed to the boom in energy drinks – hence the great sales of its Monster brand. Jones does have its toe in the energy drink pool, but just barely. Its focus is mainly on soda.
Jones also is yet to achieve real revenue or profit growth, while Hansen did that a while ago. But even without ridiculous growth, Jones can squeeze out profits on fewer revenues because they sell premium brands. And the stock has room to run. It signed an agreement with National Beverage which is likely to extend Jones’ distribution dramatically by the beginning of summer – the peak season for soda companies.
Cramer says it would be insane to think Jones is going to break into some new beverage category the way Hansen did. But by selling an alternative to Coke and Pepsi , Jones is capitalizing on the languishing soda market. Cramer is amazed that one of the soft drink behemoths hasn’t already snatched up Jones. But they haven’t, and Jones might be better off for it.
Bottom Line: While it might not be an exact replica of Hansen, the similarities are too great to ignore. Jones Soda isn’t perfect – but it doesn’t have to be. Even if it ends up being a bad copy of Hansen – well – that’s a lot better than most stocks. If you’re looking to speculate as you go into the weekend, look at JSDA.
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