GO
Loading...

Cramer's Medicine for Market Madness

Friday, 26 Oct 2007 | 11:20 AM ET
Spotlight on Pychiatric Solutions
Psychiatric Solutions has consistency, a potential legislative catalyst, and it's operating in an industry that should let it grow through consolidation for years to come, says Mad Money's Jim Cramer

With the market acting the way it is, no wonder investors are feeling a little crazy, Cramer said on Thursday’s Mad Money, starting the show wrapped in a straight jacket. The good news, though, is he thinks he’s found a stock that’s all but immune to the madness. In fast, this company makes money the crazier we get.

And that’s not to make light of the work Psychiatric Solutions does. But PSYS, the largest psychiatric service provider in the U.S. with 90 facilities and 10,000 beds, has no exposure to mortgages or any of those massive investment bank losses. The overall economy, for the most part, has no effect on the stock.

There’s no shortage of business for PSYS. One in five people in the U.S. have a mental illness, and that adds up to a $20 billion industry. Cramer said there’s potential for consolidation in the space, too, since PSYS and competitor Universal Health Services make up less than 20% of the beds – the key metric – available. PSYS has made five acquisitions in the last four years, and Cramer expects more.

The stock has a potential catalyst as well. Democrats are pushing for insurers to provide just as much coverage for mental health as they do for physical health. If that pans, out companies like PSYS should see a jump in profits.

PSYS is a cheap stock by Cramer’s standards. It trades at 20 times next year’s earnings with a 23% long-term growth rate. IF PSYS were valued the same way on its growth as UHS, the stock would be worth $60 and not the $40 it’s trading at now, Cramer said.

Market madness got you down? Cramer recommends Psychiatric Solutions.

Questions for Cramer? madmoney@cnbc.com

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

  Price   Change %Change
PSYS
---
UHS
---

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.