Cramer is a big believer in the mobile Internet’s potential. The increasing demand for music, photos and books on top of the usual cellular service is a shift in consumer behavior very similar to the mass adoption of the PC. It’s a “massive secular growth trend,” Cramer said, one that investors should enjoy for years to come.
But the industry’s hit a roadblock of sorts. All of that data is bottlenecking at the cell towers, causing a mobile Internet traffic jam. The solution? Build more infrastructure. Cramer on Thursday recommended cell-tower firmsAmerican Tower , Crown Castle and SBA Communications as plays on the build-out, but he focused on a different aspect of data transmission for today’s show: microwave backhaul radios.
Backhaul includes the data and communication that goes on between a cell tower and the wireless network. Once a phone is connected to a tower, it still needs to hook up with the network, and that’s where wireless backhaul comes in. While only 20% of backhaul in the States is done via microwave, because our wire-line infrastructure is so good, penetration is expected to increase “in a major way,” Cramer said, because of the constant increase in data moving between mobile towers and wireless networks.
The two best pure plays on microwave backhaul radios are Harris Stratex Networks and Ceragon Networks , though admittedly both are very speculative stocks. Harris’ market cap is just under $400 million, Ceragon’s is a mere $250 million, and neither trades for more than $10 a share. So the usual rules apply here: Buy in small increments, use limit orders and never pay up.
Harris Stratex controls 12% of the industry, getting 33% of sales from North America and the rest from overseas. This seemingly balanced exposure makes the stock a better pick as far as Cramer’s concerned, and the clean balance sheet with little debt and $2.15 in cash per share offers a bit more confidence as well. Harris announced weaker-than-expected guidance for the next quarter, but the stock is up 15% since, which “signals better times ahead,” Cramer said.
Ceragon is a better trade for the infrastructure build-outs happening in China and India. Both countries are focused on wireless – the Middle Kingdom plans to spend $40 billion on it – and Ceragon earns 90% of its revenue from the business, in addition to having a lot of exposure to the Asia-Pacific region. Cramer said he wouldn’t recommend the stock unless there was a pristine balance sheet to go along with it, and that’s just what CRGN has. The company holds $2.74 of cash per share and no debt.
Cramer endorsed Harris Stratex and Ceragon Networks as speculation buys, but urged viewers to proceed with caution.
“I encourage speculation to keep you interested in the game,” he said, “but you need to do it wisely with long-term stories that could be big. That’s Ceragon and Harris Stratex to a T.”
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