Rebalancing the Russell 2000: Part 2

Today, Cramer’s talking about the Russell rebalance. It’s that time of year when the Russell Indexes drop the stocks that don’t fit the mold and then re-up with new names. The strategy here is to find good companies with the best chance of making the cut because the analyst coverage alone can sometime boost a stock’s value.

Cramer has three picks he likes specifically because the coverage is so thin, and that is most likely what would fuel the upside. A quick note to keep in mind, though: These are all volatile small-cap names, stocks that Cramer would normally hold for speculation Friday. So it’s probably not a good idea to buy up shares in after-hours trading. Wait a couple of days, Cramer says, then buy in increments and with limit orders.

The first pick is Coleman Cable, an electric wire and cable company with a good business. It just acquired Copperfield LLC, which doubled its size, diversified its product lineup and helped to cut costs. The company’s a market leader, Cramer says, and only one analyst has an eye on it. Not to mention, Coleman could be a target for the likes of General Cable or Belden, too.

Second is FC Stone. This is a commodities risk management firm that came public in March. Only two analysts cover FCSX, and Cramer sees big growth in overseas business in places like China and Brazil.

Great Lakes Dredge and Dock takes third place. This dredging and demolition services company enjoys a 40% market share in a business that is protected by the Jones Act, which prevents foreign competition in the U.S. But that doesn’t mean GLDD isn’t braving other shores for growth prospects – Cramer says it does well overseas. There’s only one analyst on GLDD, and despite some budget issues with the Army Corps. of Engineers, Cramer thinks it goes higher.

Bottom Line: As of today’s close, the prices are in. We can deduce what stocks will join the Russell 2000, and for this great Russell rebalance trade Cramer likes Coleman Cable, FC Stone and Great Lakes Dredge and Dock. Check these out – buy them if you like – but don’t be one of those people who waits for the news to break and misses all the action.

Questions? Comments?