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The ‘Smart’ Play on Energy

General Electric’s Friday earnings report offered one big takeaway, at least for Cramer: An energy infrastructure build-out looks ready to take off, both in the US and abroad.

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GE on its conference call said the opportunity in smart grids, which use digital technology to manage energy usage, and emerging markets was something they took “very seriously.” We’re due for a major upgrade here at home, too, as Cramer called our old-school grid “ancient” and “badly organized,” which is why the Obama administration has been pushing hard for a change.

Therein lies your opportunity, Cramer said, though GE is not the way to play it. The company’s just too big to feel the effects of a build-out. Instead, investors want a purer play on our need for more efficient infrastructure, something that’s much more sensitive to the trend.

So who then? Cramer likes Itron , the dominant player in smart metering, which he called “the starting point for the smart-grid transformation.” Smart meters remotely connect to and read home power meters, thereby erasing the need for an in-person visit. More than that, though, they provide hourly data updates, which give utilities the information they need to monitor and manage usage at the power load. It’s these directly quantifiable savings that have made regulators so open to the switch to smart meters from “dumb” machines.

Itron controls 50% of the installed automated meter-reading market in the US and Canada, as well as 30% of the global market. And it’s the world’s leading provider of intelligent metering, data collection and utility-software solutions. Still, of the 2.7 billion electric, gas and water meters worldwide, only 7% use smart or advanced meter-reading technologies. So there’s plenty of room for growth.

Cramer’s been wrong about ITRI before, though. He recommended the stock back on April 22, 2008, as a green play, and the share price has dropped 42% since then. However, with Obama pushing for smarter, more efficient energy, he said, “The timing on this one could be just right.”

And the stock’s cheap, too, trading at about 17.5 times 2011 earnings with a 26% long-term growth rate from 2010 to 2011. ITRI was just downgraded on valuation, with the analyst saying the stock has run too much. But Cramer disagreed, pointing to Itron’s 11% year-to-date decline. He called the stock a buy.

“I think it still has plenty of room to run,” Cramer said, “given that it’s the top player in a powerful secular growth trend that’s still in its early stages.”

General Electric is the parent company of CNBC.

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