Apple’s Preferred Chipmaker?

Even despite the market’s extreme volatility, Cramer said Monday, everyone has room for one speculative stock. And right now he recommends a derivative play on everything mobile, including Apple's popular iPad product.

ARM Holdings , a semiconductor designer, has climbed 53% since Cramer first recommended it on Oct. 16, 2009, when it was trading at $7.56. While there will be some profit taking as a result, Cramer still thinks investors should buy the stock as it pulls back.

ARM designs chips and licenses them to major companies in the semiconductor industry. Its products can be found in 95% of all mobile phones and MP3 players, Cramer said, and it has a great relationship with Apple . ARM's technology is in the iPhone, and the company designed the processor for the iPad, which earns it up to 75 cents in royalties for every unit sold. Do the math: In barely two months, 2 million iPads have flown off the shelves, and Cramer thinks that's just the beginning.

Apart from the iPad, most other tablet PCs and e-readers use ARM processors, too.

"They're much more energy efficient than processors based on Intel’s x86 architecture," Cramer said. "ARM’s chips require substantially less power, which is why they’re the processor of choice for just about anyone making a mobile device that relies on a battery."

In fact, a lot of people right now are calling ARM the next Intel , Cramer said. That alone could make this stock worthy of speculation.

The smartphone revolution is such a powerful trend that it could transcend the European contagion, Cramer said. But even that’s not enough to warrant his recommendation in this market. What really set ARM apart was its bullish analyst day last month, which is one of the reasons why it's less than a point off its 52-week high.

ARM told analysts that its total addressable market will nearly double to 29 billion chips in 2014 from 15 billion chips in 2009. The company also expects to have 10 times the dollar content in mobile computing devices like the iPad than regular cell phones. Smartphones generate eight times the dollar content. That means ARM has greater revenue potential in advanced technologies, like the iPhone, when compared to other devices.

There’s also some potential pin action from Microsoft , whose next generation of Windows might be designed to work on ARM-based processors. Plus, ARM is expanding in other markets as well – including smart meters, sensors, hard drives, industrial controls – and taking share in microcontrollers, or tiny computers on a single chip that are used in everything from cars to appliances.

The stock trades at 31 times 2011 earnings, though that isn’t expensive when you consider the 22% long-term growth rate. And the fact that ARM will hold up against Europe’s contagion fears and China’s government-mandated slowdown and the US Congress’ seemingly anti-business initiatives. Cramer’s only advice is to not chase this one. Instead, wait for it to pull back to $10, about $2 lower than Monday’s close, before buying.

“That’s a terrific place to start a position,” Cramer said.

When this story published, Cramer’s charitable trust owned Apple and Intel.

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