Profits From the PC Market

Cramer wants Home Gamers to get the best prices possible for the tech stocks he’s recommending this week. Most likely share prices will already be on the rise once back-to-school season has returned. That goes for PC makers Dell and Hewlett-Packard too.

Yes, these two tech bellwethers are trading near their 52-week highs, but the big gains have yet to come, Cramer said. So investors have a chance to get in while things are still cheap. Hewlett-Packard trades at 15 times forward earnings with a growth rate of 13%, while Dell’s trades at 17.5 times forward earnings with a growth rate of 11.5%. To Cramer, that's nice and inexpensive.

The price wars between component makers like Intel and Advanced Micro Devices are widening the margins of Dell and Hewlett-Packard right now. The cheaper those components get, the more profits the PC makers earn. You didn’t think they passed that savings on to the consumer, did you? Nope, just to shareholders – and that’s why Cramer wants you in these stocks.

Hewlett-Packard has thrived under the stewardship of CEO Mark Hurd, and the company is the market leader in PC shipments with almost a 20% share. HPQ is sitting on $4 billion in net cash and sees another $4 billion a year in free cash flow. To top it all off, $7.3 billion is still authorized for a buyback, which means Hewlett-Packard can swoop in and save the stock from the house of pain if the share price dips too low.

Dell reported a great quarter, Cramer said, but still analysts downgraded the stock. The return of Michael Dell to the CEO spot might not be the same as the return of Steve Jobs’ to Apple, but Cramer trusts M.D. to fully turn the company around.

Bottom Line: Cramer thinks the time is right for Dell and HPQ.

Jim's charitable trust owns Hewlett-Packard.

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