Add Brocade to Cramer’s list of speculative tech companies to own. This once-great stock could make a comeback, he said, especially as mutual fund money pours into the sector.
Cramer is highlighting specs in tech because of the group’s growing popularity with big-money investors on Wall Street. While he would normally steer viewers away from companies who have already enjoyed a decent run, momentum is pushing tech still higher. Google , Apple , Amazon.com and Research in Motion are all great picks, but these smaller, speculative names have generated some great returns recently, and Cramer thinks we should turn to them again.
Brocade, a network-equipment maker, might not even need the extra big-money push. The company expanded its OEM agreement with IBM – Brocade makes the products, then IBM brands and sells them – and that should boost business.
Plus, this recession has kept Cisco Systems, a key competitor, in check, and Brocade has used the time to close the gap. The company also plans to enter the blade-switch market, where Cisco holds a 25% market share. An outright win isn’t needed here, Cramer said. Brocade just needs to take a little share to make some money.
On the down side, Brocade’s balance sheet is less than stellar. The company took on $1.2 billion in debt when it bought McData and a few other firms back in early 2007. But Cramer said it’s not as bad as some analysts on Wall Street make it out to be.
How do you play it? Wait until after Cisco Systems reports earnings Wednesday after the bell before buying Brocade. Cisco recently has been talking down its own business, while at the same time talking smack about the competition. If BRCD takes a hit because of this, that’s your buying opportunity.
Cramer’s charitable trust owns Cisco Systems.
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