When Polypore International first caught Cramer’s eye, popping onto the 52-week high list last week, he thought it might make for a good takeover target, much like Millipore was for Merck KGA. But after some research he realized the stock should offer much more than just that.
Polypore is a high-tech filtration company, making filtration materials in everything from old-fashioned lead acid batteries to the newer lithium-ion kind. It also makes membranes used to add or remove various gasses from liquids, as in water filtration, beverage carbonation, semiconductor manufacturing, pharmaceutical purification and even controlling gas levels at power plants. There’s also a medical business, where Polypore’s membranes help to remove toxins from blood during dialysis and aid in oxygenation for heart surgery patients.
What do all these segments have in common?
“They’re all oligopolies [with] high barriers to entry,” Cramer said, “which mean Polypore has serious pricing power, doesn’t have to worry that much about competition.”
There’s growth here, too. Polypore’s lead acid battery segment saw its revenues climb 22% in the most recent quarter, and sales from Asia are growing at a 20% clip. In lithium-ion batteries, sales soared 57% last quarter, with new demand on the way for electric vehicles. Polypore’s batter is in the Apple iPad, too, and that business is supposed to double to $80 million next year. The company is also watching its desalination market grow 20% to 25% a year, while pharma is expanding at 7% to 10%.
This is how Polypore blew away the numbers last quarter, reporting a 9-cent earnings beat on revenues that increased 27%. No wonder it’s on the 52-week high list. Luckily for investors, though, the stock has pulled back $3 from its high, giving investors an entry point.
When this story published, Cramer’s charitable trust owned Apple.
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