Baldor Electric is the latest stock that Cramer’s added to his new-tech portfolio.
Baldor makes industrial electric motors, power transition equipment and generators and drives. It’s the company’s focus on energy efficiency – an imperative during times of high fuel prices – that grabbed Cramer’s attention.
Just look at Baldor’s Super E-line electric engine. A 30-horsepower Super-E motor running continuously can save more than $1,200 a year on energy costs. The price point for the Super E is 20% more than Baldor’s other motors, but customers more than make up the difference through the money they save down the line.
The Super E-line business is growing at 25%. That’s a strong number compared to the rest of Baldor’s motor business, which is growing at only 10%. The Super E footprint should get larger and larger, providing Baldor with some healthy growth.
Other reasons to like BEZ:
- The 2007 energy bill, which mandated more energy-efficient motors, should result in at least 10% sales growth.
- The Reliance and Dodge acquisition exposed Baldor to more business overseas and broadened the company’s product line.
- The stock is cheap. It trades at 12.9 times forward earnings with a long-term growth rate of 13.7%.
There is a huge short position in Baldor, though, that’s worth consideration. Cramer blamed that on the company’s high debt-to-capitalization ratio. But there are plans to bring that ratio down to historic levels ahead of schedule that seemed to have put him at ease.
If anything, he said, some positive news from Baldor could send these shorts running to cover – and that “would send the stock soaring.”
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