America's Corporate Undertaker
At the same time Bernanke was speaking about “substantive cuts”Thursday, Thomas Hoenig, another Fed chairman, was saying that inflationary pressures are building and the economy might not be in such bad shape. With such apparent dissonance within the Fed, Cramer reiterated the importance of hedging bets in case the central bank decides not to bail this economy out. Cramer’s hedge play is EPIQ Systems, a company that profits off of bankruptcy.
Epiq operates in three key legal segments that should all be bolstered if the Fed waffles: electronic discovery, settlements and claims, and bankruptcy.
With bankruptcies ramping across the country, corporate pain is Epiq’s gain. The company has been retained for everything from airline bankruptcies to mortgage bankruptcies, essentially making it America’s publicly traded corporate undertaker, Cramer said.
But it isn’t cheap. Epiq is growing fast but it comes with a huge multiple because it hasn’t yet been able to serve up the earnings on its growth. The company also recently did a secondary offering to raise capital in order to prepare for more bankruptcy chaos.
Epiq isn’t a sure thing, Cramer warned. If the Fed delivers on its promise to bail the economy out, the stock probably won’t do much because of its inability to deliver on earnings thus far, Cramer said. But if the Fed goes the way of Hoenig, or his like-minded colleague Dick Fischer – both of whom have been adamant about cutting rates – Cramer thinks Epiq could be the ultimate hedge against prosperity.
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