Your All-Star in Cramer's #StockDerby
"The results of our All Star Home Dun Derby are in and Arena Pharmaceuticals was the people’s choice," Cramer said. "But it’s not my choice."
Arena's stock rallied 225 percent in the second quarter and has gained 540 percent year-to-date. As a development stage biotech firm, Arena doesn't have any drugs on the market, let alone any profits. But the firm does have Belviq, which was the first weight loss drug the Food & Drug Administration has approved in more than a decade. Obesity is a huge problem, so the analysts who cover the stock think Belviq could do peak sales of up to $3 billion. If that's the case, Cramer thinks Arena's stock looks pretty cheap at current levels.
"All of this sounds pretty darned sexy, but I worry that Arena won’t be able to live up to the hype," Cramer said. "And, honestly, the fact that so many people voted for this one makes me much more skeptical about the stock’s prospects."
To Cramer, Arena's stock is so popular that it seems the upside might be exhausted. He thinks the risk-reward ratio isn't that great either.
So what's an Arena shareholder to do?
"Sell half and you can let the rest ride," Cramer said. "Or if you're worried about competition, maybe take all but your initial investment out of the stock then play with the house's money."
Read on for Cramer’s 10 Stocks You Might Have Overlooked
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