Mad Money

Cramer: How to Trade Tech Specs


When a secular growth trend as big as, say, Internet video hits the market, some good money might be made through speculation. Smaller, riskier stocks could work just as well as the sector’s bellwethers – as long as you know how to trade them. There’s a specific way to go about it, which Cramer explained on Friday.

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Regular Mad Money viewers know how bullish Cramer has been on tech lately, especially certain segments like smartphones and mobile Web. Well, Internet video also falls into this category. By 2013, it should represent 60% of all online traffic, up from about 33% now. Keep in mind also that over the next four years the Internet is expected to grow at 40% annually, so video will capture a much bigger piece of a much bigger pie. A lot of the growth will come from IPTV, or Web video channeled through a television. The expectation is for a 144% per-year increase through 2013.

Cramer likes Cisco Systems as a play on this, but there are some smaller tech specs that may work as well. He endorsed Ciena, which makes the switches that carry video signals within a network. Stifel Nicolaus recommended the stock as well, initiating a buy call on CIEN today.

For those seeking more risk, Cramer suggested looking into Infinera, Akamai and three stocks that deal in “deep packet inspection”: Cavium Networks, EZChip Semiconductor and NetLogic . Deep packet inspection allows networks to filter data packets to prioritize the order in which they are sent. Put simply, the technology gets you quality video faster when you’re watching TV over the Web. These last three stocks have been especially popular lately, Cramer said.

Remember, though, that all of these suppliers depend heavily on Cisco and Juniper Networks. So if either company shifts strategies on a whim, Akamai, NetLogic and the others will suffer huge losses. So be sure to take profits if and while you have them. And follow the usual speculation rules – use limit orders. Otherwise, Cramer said, you won’t make any money in these stocks.

Cramer's charitable trust owns Cisco Systems.

Call Cramer: 1-800-743-CNBC

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