Cramer Digs Deep For Another Winning Contest Stock

Last week, Cramer picked a winner for all you Home Gamers playing CNBC’s Million Dollar Portfolio Challenge. Ionatron was the perfect speculative play for a contest because it was cheap and there was great potential for a pop on as yet undecided events. The company announced April 30 before the market opened that it had won a $500,000 contract with the U.S. Navy, and now the stock is up 15%.

Well, today Cramer’s got another pick that fits these same criteria. Golden Star Resources is a $1 billion gold miner that trades at around $4.50. It mainly operates in West Africa, with a flagship mine at Bogoso/Prestea in Ghana, and South America.

You might think that West Africa and South America are risky places to operate a gold mine, but that’s not where the speculation comes in. GSS is planning to build a new sulfide-processing plant at its Bogoso site. The plant offers a new technology that would finally allow the company to process some of the 82% of its sulfide ore profitability that it can’t right now.

Cramer says the doubt among many analysts that this will happen any time soon has caused a pullback in the stock – a perfect buy-in opportunity. If you plan to buy for your real portfolio and not the CNBC contest, be sure to use limit orders. Remember, this is a pure speculative play.

Here’s Cramer prediction for how the upside story could play out: Management could announce the completion of that Bogoso plant sooner than expected. That would chill out the analysts and maybe lead to some upward estimate revisions. A completed plant is expected to double GSS’s gold production compared with last year while at the same time reducing cash costs. This all could bode well for the numbers.

Again, if you’re buying for real, Cramer thinks there’s takeover potential here, especially if that plant gets up and running. Also, gold prices are helping to move the stock. Adams raised its price target on the stock from $2 to $6.50 back on April 19 because of the move in gold, and there’s still plenty of room to run before GSS hits that target. There’s your speculation.

Bottom Line: GSS – Buy it for the game, buy it for the glory, or do what Cramer would do and buy it because he thinks it’s going much higher.

Questions? Comments? [e-mail]