The War Between Cable and Telco

Tech stocks can definitely trade together, but more often it’s the specific product cycle a company’s in that determines its share price, Cramer said. That’s why ADC Telecommunications, “an arms provider in the war between telco and cable,” should outperform regardless of where the market goes.

Verizon and AT&T are spending tons of money building out their voice, cable and internet triple-play networks. ADC Telecommunications, with its fiber, broadband network equipment and connectivity, sells them the equipment they need to do it. So ADCT’s plugged into a high-growth area that’s booming while the Dow continues to drop.

The stock’s way down since Cramer recommended it back on Dec. 18 – $13.52 from $17.72. But he attributes that to the indiscriminate selling in tech lately. The good news for investors is that ADCT might drop even more, giving them a better entry point. And since the Mad Money host thinks the franchise has gotten much stronger, “it makes sense to buy a lot more down here.”

Credit Suisse upgraded ADCT last week, saying the stock should return to its historical multiple range of 16 to 18 times earnings. That puts the price target between about $19 and $21 – a $5 to $7.50 gain.

Even then, though, Cramer thinks the valuation is too low. And a situation like that might catch the eye of Carl Icahn because ADCT then becomes more valuable to a Motorola or Cisco Systems than it is to the stock market. “And a guy like Carl Icahn could make deals happen,” Cramer said, “especially given his sizable stake in Motorola.”

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