Mad Money

Cramer: Lightning could strike again on these

When Jim Cramer looked at the action of the on Tuesday, the first thing he thought was that every dog has its day, and that day was Tuesday.

The biggest dog that wagged its tail was Micron, the low-cost DRAM and flash memory producer that was down almost 50 percent for the year as of the close on Monday. And while Cramer thinks the company is a terrific manufacturer, it has done nothing but act like a falling knife.

"One thing we know about manufacturing is if you are making commodities and the market for those commodities is in a decline, tamping down demand, while you go full out pumping supply, your average selling price is going to plummet and so are your earnings," the "Mad Money" host said.

Everything changed Tuesday when investors learned that Tsinghua Unigroup reportedly wants to buy Micron for $23 billion, even though the company was worth $19 billion on Monday.

A booth of Micron Technology at an industrial fair in Frankfurt, Germany.
Kai Pfaffenbach | Reuters

Cramer wants investors to know two things about the Micron bid:

No. 1 Micron is probably worth considerably more than $23 billion when its plants are taken into consideration.

No. 2 There is enough proprietary content at Micron that the U.S. government might block the bid.

So while Micron has acted horrendously in the past, it's one dog that is having its day. Cramer also saw that other dog stocks in the same group rallied Tuesday, with Sandisk up 3 percent.

Shockingly, even Seagate pulled off a rally after its disappointing preannouncement Monday. This is a company that makes disk drives, which is one of the worst businesses out there in Cramer's opinion. However, it does have good cash flow and management once took the company private because they felt the stock was undervalued.

"People are thinking lightning could strike again," Cramer said.

Another stock that took Cramer by surprise was Urban Outfitters, which got a big upgrade from Jefferies on Tuesday based on the strength of its brands. He was shocked to see that the stock is actually up 3 percent for the year considering its disappointing performance.

But biggest dog stocks that turned around were the offshore drillers. Wowzer! Just take one look at Diamond, Transocean and Ensco and see they are on fire. Why?

Because Wednesday is the day that companies can tender for oil rich Gulf of Mexico properties, for the first time in 80 years, which is great news.

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"Like all of the other gainers, the prospects for instant gratification here are nil, but people can resist buying stocks with big catalysts," Cramer said.

So while the action in these dog stocks was attractive Tuesday, Cramer is not about to start drawing any positive conclusions about them. However he wouldn't be surprised to see some second-day rally activity. After all, the market finds a way to love the unloved eventually.

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