Mad Money

Inverness Passes Cramer's Test

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There’s nothing like a catalyst to drive up a stock price, yet Inverness Medical’s potential purchase of Cholestech is only one reason to own IMA, Cramer said.

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Inverness Medical

Sure, adding Cholestech’s cache of cardiology diagnostics to Inverness’ own pipeline of pregnancy, fertility and other tests puts IMA in a “whole new category,” according to Cramer. But Inverness is also a play on what he sees as a business with tremendous growth potential for years to come: healthcare cost containment. When diseases are caught early and treated effectively, that amounts to huge cost savings, Cramer said. That’s where Inverness comes in.

On top of this, Inverness has a nice 50/50 joint venture with Procter & Gamble that gives IMA $300 million in cash to pay off debt from the acquisitions it has been making. Being able to harness P&G’s massive marketing and distribution capabilities doesn’t hurt either. ClearBlue, the digital pregnancy test that came out of this JV, is already a market leader, and Cramer expects an over-the-counter strep test next year.

Actually, Cramer said he wouldn’t be surprised if P&G bought Inverness, or if Johnson & Johnson did, for that matter. In fact, JNJ has a history of buying diagnostics companies, he said, and a merger would work well for both of them.

The bottom line? IMA is a great stock to own in this economic downturn, Cramer said, and it’s also a great play on the long-term healthcare cost containment story. “My charitable trust owns it," he said, and "I regard that as a great endorsement."

Jim’s charitable trust owns Inverness Medical.

Questions for Cramer?

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