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King of the Oil Patch

Anyone who follows Cramer knows that on a down day like Thursday – 362 points in the Dow – he recommends investors go shopping. It’s days like these that some of the best stocks are put on sale, and right now oil is too good to pass up, he said.

But not just any company in the sector will do. Investors don’t want to go anywhere near Exxon Mobile as far as Cramer’s concerned. Even though a barrel of oil costs over $90 in the market, XOM still shrunk earnings by 10% last quarter. Instead, look for an outfit that’s a bit leaner, meaner and hungrier.

Enter Apache , an exploration and production company that believes in expensive oil. Exxon doesn’t believe oil can maintain its levels, Cramer said, and that’s why it never boosted its production to accommodate. Apache did. Apache also never locked in its delivery contracts at lower rates because it believed oil was going higher. That’s why the second quarter was a blowout, with a 21-cents-a-share beat.

Apache makes money buying up unwanted properties and turning them into profitable operations. The company is the lowest-cost producer of oil and gas, and it thrives where rivals don’t.

Some major discoveries of oil overseas, in Australia especially, have become a boon to Apache. The Australia taps alone are supposed to increase production over 150%, the company’s chief financial officer said on the conference call. Oil was found in Egypt, too. That, coupled with Australia, should mean more earnings visibility for Apache, and the Street loves that.

Cramer likes the multiple as well. Apache trades at about 12 times earnings, while its rivals trade at least three times higher, some as much as six. If Apache got a 15 multiple, this $100 stock would go to $130. Cramer thinks it could earn 17 times earnings, which would get the stock to $147.

Apache is the king of the oil patch, Cramer said. The company believes in high oil prices, and it’s doing everything it can to profit from them. Homegamers who buy this stock on discount should profit, too.

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