Sallie Mae Speculation Pays Off
Web Editor, "Mad Money"
What’s the best way of “Getting Back to Even” – the title of Cramer’s new book – after the horrible market declines we saw throughout 2008 and early 2009?
- Cramer's 12 Stocks to Play the Recovery
Speculation, the Mad Money host said Wednesday.
Of course, the so-called experts advise against managing your own money, telling you instead to dump your nest egg in an index fund. But Cramer couldn’t disagree more. He believes everyday investors, Mad Money’s viewers, have what it takes to pick winning stocks, even if there’s a bit of risk involved to keep things interesting.
In fact, that’s the whole reason he recommends speculation. For a lot of people, stock research can be tedious and boring. So the edge-of-your-seat fun that comes with a long shot can keep people in the game.
SLM Corp. certainly kept things interesting. The stock jumped 21% on Tuesday alone, thanks to a massive earnings beat, and it’s up 62% from Cramer’s June 5  recommendation, which is when he called it his speculative stock of the year. At the time, most investors thought President Obama’s intended reforms for the student-loan industry would kill Sallie Mae, but Cramer’s research seemed to predict a different outcome.
Not only was SLM trading below $7 back then despite a previous buyout offer of $60 a share, but also CEO Albert Lord told a banking conference at the time that, reform or not, his company would stay in business. Not to mention, Sallie Mae was packing $2 of earnings power per share and trading at just three times earnings.
Management said today on its conference call that the 26 cents a share earned this quarter should jump to 50 cents to 55 cents next quarter, over $1.50 in 2010 and even more in 2011. So while Cramer urged SLM shareholders to take some profits, he said the stock’s “got room to run.”
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