In an effort to offer Home Gamers ideas about some solid American companies that don’t rely on exporting goods to make a profit, Cramer came up with his Three Bs portfolio. He’s less than thrilled with Fed Chairman Bernanke’s methods of regulating the markets, so Cramer’s a bit more bearish than usual. These three medical-device stocks, he thinks, are good protection against lagging American earnings.
The last company in the portfolio is Baxter. We already talked about CR Bard and Becton Dickinson, but BAX is only a dollar of its high and it has been outperforming all the other Bs over the past year. Maybe you thought Boston Scientific was worth a look. It does seem to be in recovery. But Cramer is quick to point out the differences between a best of breed and a worst of breed medical-device stock.
Just check out the product portfolio. BSX gets 80% of its revenues from vascular. It doesn’t look like BSX is following Cramer’s golden rule of diversification. Baxter, on the other hand, works in the hemophilia and immune conditions sector, makes drug reconstitution sets, IV solutions, drug formulation and packaging kits, and dialysis systems. The range of its products and services make it much more reliable, and less speculative, stock than Boston Scientific.
Cramer doesn’t think BSX makes the best business decisions either. It paid way too much for Guidant, and now, to help pay down the debt incurred from that deal, it’s considering spinning off two businesses that actually keep it diversified in relation to its vascular division.
Cramer thinks you should stick with these three Bs: CR Bard, Becton Dickinson, and Baxter. He says these three medical-device plays are some of the few American stocks that aren't levered to foreign business and can thrive in a tight Fed environment.
Bottom Line: When you're playing defense, you don't speculate on a worst of breed stock like Boston Scientific. You find best of breed, Baxter, and you wait for some weakness in the stock and back up the truck.
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