Better Than Ramen Noodles

Add American Italian Pasta to Cramer’s list of trade-down plays. The company’s a leader in both the private-label and brand-name markets, he said, and the stock “has the potential to explode higher.”

American Italian Pasta is North America’s largest dry pasta maker and the largest private-label pasta maker in the U.S. The company’s name brands include Heartland, Golden Grain and Muellers among others, but also provide private label Great Value Pasta to Wal-Mart. In fact, AIPC is Wal-Mart’s sole supplier of pasta, which accounts for 22% of the discount giant’s sales, and that’s a huge boost to business.

The company gets 50% of its total volume from private-label sales and 67% of retail-sales volume. AIPC commands between two-thirds and three-quarters of the retail private-label past market. And management is putting its focus on developing its private-label products. As Cramer called it, AIPC is king of cheap pasta.

Declining raw costs will also be a boon to American Italian Pasta. Cramer expects the benefits from lower wheat prices to kick in by the second half of this year. Investors who like AIPC’s story should be in ahead of that.

The stock makes sense because pasta’s a cheap, easy dish for those who want to save money by eating at home. That’s why AIPC is up to $30 from $4 in the past year. But this is a small company with a market cap of only about $600 million. Only four analysts cover American Italian Pasta. And because of the big run, investors should at least wait for a pullback before buying. The stock’s cheap on a price-to-earnings basis, but that doesn’t always matter with these smaller names.

So use limit orders, Cramer said, and never buy all at once.

Cramer's charitable trust owns Wal-Mart.

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