Game Plan: Gaming Yearend Stock Markups
The end of the year offers investors one of the best ways to trade short-term moves for a profit: markups.
Markups are a common practice among mutual funds, Cramer said. Institutions buy shares in stocks in which they already have large positions to boost the share price. Then they point to those gains as proof that the fund is doing well.
Regardless of what you think of the practice, the bottom line is that markups move stocks. For this week’s Game Plan, Cramer offered up his five most likely candidates. And in keeping with the usual Mad Money rigor, he said he thinks his picks are solid investments even if mutual funds pass them over.
Jacobs Engineering is an infrastructure company with three quarters of its business levered to oil and gas. Most of JEC’s customers planned their projects when oil was much lower, at $40 to $50 a barrel. But now that the commodity is much higher, Cramer said he expects more demand for JEC’s services.
The services of MEMC Electronic Materials are in demand, too. Solar companies can’t get enough of MEMC’s silicon wafers. Just look at the $7 billion to $8 billion contract with Conergy, the world’s largest solar integrator. According to Cramer, another similar contract might happen in 2008. And MEMC has good fundamentals: a big buyback, great balance sheet and tons of cash.
With iPod sales still strong, the new operating system Leopard driving computer sales and the iPhone ahead of the competion, Apple is a natural buy, Cramer said. So much so, "it's a stock you need to show you own at the end of the year if you're a mutual fund manager or else people think you're an idiot."
GameStop’s in the sweet spot this season. Cramer called it “the number-one retailer in the best season for games in history.” Finding a Wii console has been no easy task this holiday season, but now customers have been promised a Wii by the end of January if they pre-order at GameStop. So now GME is ringing up even more sales thanks to that nice partnership with Nintendo.
Lastly, Cramer said he likes seed-maker Monsanto . The U.S. doesn’t have enough corn to meet the demand for food, let alone energy, but Monsanto has a see that increases the crop’s yield. MON expects to command 30% of the U.S. corn market, up from 23% now, by 2012.
Cramer recommended getting into his picks early next week because the Securities and Exchange Commission prosecutes funds that engage in marking up stocks. So the more clever ones do their markups early.
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