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The Advantages of Being Chummy With Chavez

Friday, 6 Jul 2007 | 7:01 PM ET

While a lot of companies operating in Venezuela might be cheap because investors fear the Communist leanings of Hugo Chavez, Cramer knows of at least one company that’s been unfairly knocked down.

Ternium is a steelmaker with operations in Venezuela, but it has its home base in Argentina – and Chavez likes Argentina, Cramer said. The president doesn’t see TX as a foreign company. It’s a South American company, and Cramer thinks that should soften his heart enough to let it continue doing business.

The fact that Argentina President Nestor Kirchner spoke to Chavez personally about Ternium can’t hurt either, Cramer said. He thinks the two countries are close to a price-control agreement that would still allow TX to operate in Venezuela.

Ternium is a $6 billion company, much larger than a typical speculative play, but there’s so much room for improvement Cramer had to talk about it. To Cramer, there’s no question that if Chavez decides to nationalize Ternium’s Venezuelan properties the stock will get hit. But if an agreement is reached, the stock should spike. Hence, the speculation.

TX trades at 7.3 times forward earnings, when the mean multiple for similar companies is 12. Chalk it up to another Chavez discount.

Bottom Line: Don’t let the reds scare you out of a great play. Give Ternium a shot.

Questions for Cramer? madmoney@cnbc.com

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