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Striking Gold With Zinc

Horsehead Holdings, a strong zinc refiner that’s new to the market, couldn’t have picked a worse time for its IPO. The company came public in August in the middle of the credit crunch almost invisible to Wall Street.

Nor was it a good time to be in the metals and mining sector. Freeport-McMoRan sold off to a low of $67.07 in the middle of that month after closing just under $94 on July 31.

But the Federal Reserve’s 50-basis-point rate cut changed everything. Cramer said he thinks the metals, zinc especially, have bottomed, and FCX is back up to about $109. Horsehead might not climb quite so high, but “I think the stock ought to see some of the action that the other metals stocks saw,” he said.

“The only thing keeping ZINC down is the fact that no one knows it,” Cramer said.

That probably won’t last for long, though. The one firm that covers ZINC said the no debt, solid cash flow and cheap valuation will probably be too hard to resist for a zinc miner looking for a refinery play. Still, Cramer said it should be a while before ZINC gets bought out.

Cramer expects this orphan stock – what he calls a small-cap with little analyst coverage – to start getting more and more coverage. And with that the share price should go “much, much higher.”

Jim’s charitable trust owns Freeport-McMoRan.

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

Symbol
Price
 
Change
%Change
FCX
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ZINC
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