Newly public stocks are, by their very nature, speculative, and while some are great opportunities after last week’s tumble, others are still risky and should be avoided at all costs. For this segment, Cramer went through all the IPOs he has focused on, recommended and told you to stay away from recently, and where to go from here.
Fortress Investment Group is a sell, Cramer says. Goldman Sachs – which Jim’s charitable trust owns – is cheaper, and it’s a better company. Cramer suggests that if you own FIG, switch out to Goldman.
Also in the Sell Block are Melco and IPG Photonics. Melco is down 13% since the IPO and 23% since its first-day closing price. Investors should just cut their losses and get out of the stock. IPGP is down 19% since its first-day closing price, but those who got in on the IPO are up 26%. Cramer says to still take profits while you can.
Don’t get the wrong impression. Cramer hasn’t necessarily been off with his picks. If you actually were able to subscribe to the IPO, you’d only be down on one out of 10 stocks. Of the rest, seven are up double digits. Getting in on the actual offering can be hard to do, but if you followed his advice and didn’t reach after the stocks came public, then you probably haven’t gotten hurt either. And hey, Cramer did tell you to stay away from Artes Medical, a stock with an initial range of $12-$14 that ended up pricing down at six bucks and closing at the high $7, where it’s still sitting after a short run up to $10 and back.
As for stocks to buy, Cramer likes Switch & Data at its present levels. It’s a great network collocation company, and it’s coming off its quiet period, so it should start getting a lot more attention and positive news flow in the near term. It has a great, if hard-to-understand, niche in collocation, where demand is outstripping supply, and if we value it like its best competitor, Equinix, the stock is incredibly cheap.
On weakness, Cramer would buy Aerovironment and Opnext. AVAV makes unmanned aircraft, and he considers it a great defense play. Opnext is one of these optical component suppliers that are having a bit of a renaissance right now.
Bottom Line: Sell Fortress, sell IPGP and Melco on strength. Buy Switch & Data now. And buy AVAV or Opnext on weakness.