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Jun.13
7:42 PM ET
Friday, 13 Jun 2008
Speculating on Sun Hydraulics

One of Cramer’s hard and fast investing rules is that 20% of a portfolio can be speculative. A little risk makes the game exciting and fun. That’s important if 10-K reports, accounting statements and Microsoft Excel spreadsheets leave you bleary-eyed after a couple of hours. The potential payoff helps to keep your goals in sight.

That same anticipation also will animate a seemingly uninspired business like screw-in cartridge valves and manifolds. Yeah, we know – too exciting for words. But that’s just how Sun Hydraulics [SNHY  Loading...      ()   ] makes its money. Below that boring façade, though, is a booming industry.

Just so everybody’s on the same page: Cartridge valves control the force, speed and motion of fluids within a hydraulic system, and the manifolds are where you put the cartridges. The fact that Flowserve [FLS  Loading...      ()   ], Robins & Meyers [RBN  Loading...      ()   ] and Colfax [CFX  Loading...      ()   ] all are up today should give people an idea of how the fluid-control sector’s doing.

Sun Hydraulics is a new-tech name, making cartridge valves that are lighter, more flexible and more efficient than their cast-iron predecessors. The industrywide switch to these newer valves has spurred tremendous growth in SNHY and lent the company a good amount of pricing power. Sun Hydraulics’ cartridge valves go for as much as a 30% premium to the competition.

There are other reasons to like this stock, too: SNHY’s venture with White Oaks Controls and High Country Technologies to bring an electronically controlled integrated valve system to market; a strong export business, which makes Sun Hydraulics a good weak-dollar play; the possibility, Cramer said, of a takeover; very little analyst coverage; and a great balance sheet.

SNHY could go to $48 from $37, Cramer said, just on the strength of the company’s growth alone.

Remember, this is a small company, with just about a $623 million market cap, and the stock was up big Friday. So be smart and wait to buy – if that’s what you’ve decided to do after finishing your homework on Sun Hydraulics.


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