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Jim Cramer: Play This Health Care Tech Name, Not That

Thursday, 15 Mar 2012 | 6:42 PM ET
Cramer's Case to Sell Allscripts
Mad Money's Cramer explains why the best way to play the expansion of electronic medical records is to sell Allscripts and swap into Cerner, the next time the stock gets pulled down with the rest of the market.

“Mad Money” host Jim Cramer now admits he’s been “backing the wrong horse” in the health care information technology wars. For years he has recommended Allscripts Healthcare Solutions as the way to play the switch to electronic medical records. While he was initially right, it turns out, Cerner is the better play, he said.

“I'm going to eat some crow, admit the error, and tell you it's time to put Allscripts in the sell block,” Cramer said. “If you want a healthcare IT play, the stock to own is Cerner, although I suggest you keep your powder dry on this one because it's been red-hot and we could get a pullback.”

The reasons are as follows:

Execution. Cerner has been “consistently fabulous,” he said. It has developed more of its software in-house and people prefer its system because it has superior technology. Allscripts , on the other hand, has had trouble integrating Aclipsys platform, which it bought in 2010, with its own. There are also a large number of different versions of its software on the market.

Market share. Cerner has about 13 percent of the hospital market, while Allscripts has only 4 percent.

Visibility. Cerner has “fantastic visibility,” Cramer said. It can already predict about 75 percent of its earnings approximately a year out. Allscripts has had trouble managing expectations.

“Cerner has the better technology has the better technology, better execution, better visibility, [and] it's the better way to play the expansion of electronic medical records,” he said.

Call Cramer: 1-800-743-CNBC

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