A Split-Personality Stock
Sure, we’ve enjoyed a couple of good days in the market, but this is still a recession-like environment. So capital preservation should be the primary focus here.
Health care is usually a “safe” area – if such a place exists – to be in during hard times. That’s why Cramer created his Cramerican Marine Field Guide to Recessions, highlighting names like Smith & Nephew. Well, today he added Symmetry Medical to his list of possible plays while the market is down.
Symmetry is an arms dealer of sorts to Biomet, Zimmer Holdings, Stryker, Johnson & Johnson and Smith & Nephew, making forged, cast and machined products for orthopedic implants and devices. Basically, Symmetry makes the parts that go into the implants that these companies sell. And as Cramer said, no one stops getting hip replacements just because the economy’s in the tank.
Symmetry also makes the instruments that doctors use to place and remove implants, and the company makes cases for organizing, securing and transporting highly-sensitive medical devices. Symmetry also helps other smaller device firms get the equipment they need, and it helps bigger names cut costs.
The problem is that Symmetry’s stock dropped 27% after one of the company’s U.K. operating units overstated revenues last October. A $2.2 million hit from legal and accounting fees followed, which couldn’t have been easy for this small name.
But Symmetry’s management has been working diligently with the SEC, Cramer said, so he’s confident the company will pull through this episode. So the lower stock price is, if anything, a better entry point.
Buying now could pay off if Symmetry outperforms, which is what Cramer expects. Wall Street’s looking for 8.5% revenue growth, but management predicts 12% to 15%. As long as the SEC trouble works itself out, Cramer said SMA could go to $21.
Of course, the usual speculation rules apply: Do your homework. Wait a week to buy. Use limit orders. Buy in small quantities.
Otherwise the stock could move higher, and Cramer doesn’t like SMA as much over $16.
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