Garmin Guides Investors to High Growth
Cramer has been applying the same strategy he used during the credit crunch of 1990 to the one the market is suffering through now: go heavy on food-and-beverage, soft-goods and high-growth stocks.
Because he already offered up a number of companies in the first two categories, tonight he decided to focus on the latter, specifically Garmin .
This global-positioning-systems maker has 42% earning growth, using consensus estimates. Garmin reported an “amazing” second quarter, Cramer said, which led to massive upward earnings revisions by analysts. Merrill Lynch topped them all by predicting the company will earn 39% more than expected.
“We were actually surprised at our own performance in the second quarter with the margins exceeding 50% across the business,” Chief Financial Officer Kevin Rauckman said over the phone during Mad Money tonight.
He credited the combination of cost savings for products coming out of Garmin’s factories coming in lower than anticipated as well as better-than-expected pricing.
Of all the troubles in the market these days, Garmin had “the highest-quality problem of anybody I talked to this quarter,” Cramer said. On the earnings call, the company said manufacturing capacity was the biggest challenge Garmin faced. So it bought a third factory in Taiwan, and shipments are already leaving the facility.
Using Merrill Lynch’s 2008 earnings estimates and Garmin’s historical multiple of 25 times earnings, the stock should go to $116, Cramer said. Even if GMRN drops to $91, he still recommends buying it.
“I reiterate that there will be a few high-growth stocks that will make you money in this period if you hang with them,” Cramer said, “and one of them will be Garmin.”
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