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In Awe of Shaw Group

Wednesday, 24 Oct 2007 | 10:36 AM ET
Shaw Group Redemption
Mad Money host Jim Cramer discusses one of his favorite infrasstructure plays.

There was no stopping Shaw Group after last quarter’s earnings beat. It was the biggest of the season: 60 cents a share on an expected 34 cents a share. The stock rose so quickly there was no entry point for new buyers. Then Friday’s 366-point Dow decline happened. Now this play on infrastructure, one of Cramer’s favorite bull markets this year, is on sale.

Shaw Group builds power plants and is enjoying what Cramer called an “international renaissance” in nuclear power. SGR, which is contracted for the engineering, procurement and construction of these facilities, gets a boost every time China, India or any number of other countries gets approval for a new plant. They’re good catalysts for the stock, and they give investors something to look forward to.

Another plus for shareholders is that Shaw, like Google and Intuitive Surgical, is cheap. The stock trades at 28 times next year’s earnings, which Cramer thinks are way too low considering the beat, with a 20% long-term growth rate. Fluor trades at nearly 30 times earnings with a 17% growth rate. There’s no way, after SGR’s quarter, that this company should be trading at a discount, Cramer said.

Lastly, there’s a chance Shaw Group could get taken over. Cramer thinks this small $5 billion company would make the perfect target as the infrastructure sector consolidates.

Investors who don’t already own Shaw Group should consider themselves lucky, Cramer said. Last Friday’s sell-off made this great stock affordable.

Questions for Cramer? madmoney@cnbc.com

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

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