Mad Money

Otter Tail's Diamond in the Rough

Cramer's Second Wind, Pt. 2

As much as Cramer likes wind-power company Trinity, it’s not his favorite stock in the sector. That honor goes to Otter Tail, a collection of disparate businesses that includes DMI Industries, a fast-growing wind tower manufacturer.

Cramer sees DMI as a diamond in the rough of sorts, that just needs to be spun off to unlock its tremendous value. Just how valuable is it? Analysts at D.A. Davidson predict that DMI alone – forget about the rest of Otter Tail’s businesses – should see 63% earnings growth in 2008.

If DMI offered shares of its own, there’s a good chance Wall Street would jump all over it, Cramer said. He figures a spun-off DMI would be worth about $37 a share, which is $1 more than Otter Tail’s trading at now.

In the meantime, DMI’s handling business as it should while it waits for Otter Tail to realize wind power’s true potential. DMI already built over 600 towers, holds 18% of the market and it’s expanding one of its Canadian plants to boost production. Not to mention, DMI operates in some of the best wind markets in the U.S., namely North and South Dakota, Montana and Minnesota, just to name a few.

Be careful with Otter Tail, though, if you choose to buy a position. The stock doesn’t trade much, so Cramer recommended using limit orders. And whatever you do, don’t pay over $37 for OTTR, he said.

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