Mad Money

Cramer: Prepaid profits, a gift for portfolio

Prepaid industry on fire: Cramer
Prepaid industry on fire: Cramer

Cramer is always looking at new trends. And he thinks the popularity of prepaid gift cards, and the resulting profit potential could be a gift for long-term investors.

"This has become a huge industry," Cramer explained. "In the United States alone, retail purchases made with prepaid cards should top $200 billion, roughly five percent of all retail spending in this country."

But if you're looking to leverage the trend, Cramer thinks only a few stocks get the job done, with Blackhawk Network Holdings among his favorites.

"Blackhawk originally started a subsidiary of Safeway that was spun-off as an independent company in April of last year," Cramer said. "Today it's a leading distributor of prepaid and gift cards that processed $10 billion in transactions last year, and that number should rise by 38 percent for 2014, which is pretty darned impressive."

Micah Young | Getty Images

Of course, no matter how good a company may be, shares have to priced right, or establishing a position doesn't make sense.

Looking at Blackhawk, Cramer said "with the stock currently trading at 18.6 times next year's numbers with a 19 percent long-term growth rate, in my book it's pretty inexpensive. I'd start small with Blackhawk, put on maybe a quarter of your position and then wait for the next market spasm to generate weakness, and then buy more on a decline."

There's another stock in the same space, that Cramer also thinks warrants attention, however in this case, he doesn't think it's priced right.

It's Green Dot.

"If you get a prepaid MasterCard or Visa debit card, there's a good chance it's from Green Dot," Cramer explained.

Their cards are available at roughly 90,000 retail locations, ranging from supermarkets and drug stores to pharmacies, convenience stores, and more.

"Given that the company has twice the number of active cards in circulation as its next closest competitor," Cramer believes the scale make Green Dot able to fend off growing competition.

However, as much as Cramer likes the opportunity he never likes to chase a stock; and Green Dot rallied a whopping 20 percent on Wednesday due to a .

Although Cramer thinks the long-term opportunity is significant, he thinks investors will be able to buy shares, lower. Therefore, "Given the enormous spike in the stock today, my view is that you should wait for Green Dot to pull back to $20 or less before you pull the trigger."

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"Here's the bottom line," Cramer said. "The prepaid industry is on fire here, just growing like a weed, which is why I think Blackhawk's a buy right here, while Green Dot could be worth picking up after it cools down from today's enormous rally.

Call Cramer: 1-800-743-CNBC

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