Cramer's Mad Money - The Next Brazil (2/8/11)

 |  Includes: CIB, EC, JPM, MSFT, VIAV
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 8.

Bancolombia (NYSE:CIB), Ecopetrol (NYSE:EC)

Emerging market plays are down on the news of the revolt in Egypt. Even Latin American stocks; "The market can't read a map to save its life." Interest rates in China are also affecting Latin American stocks, which doesn't seem to make much sense, but at least it provides a buying opportunity.

Everyone knows the bullish story on Brazil, but Cramer is in search of the "next Brazil." Colombia, which has rich oil and mining resources, an unemployment rate falling from 12.3% to 11%, and a business-friendly government "is where Brazil was 8 to 10 years ago." The GDP is expected to rise 5% in the next two years, compared to the 4.3% average and President Obama discussed just yesterday a trade agreement with Colombia. Coffee prices are rising, and the merging of the Chilean and the Peruvean stock markets will create more liquidity.

Cramer would buy Bancolombia (CIB), the largest bank in the country which has 21% market share. With unemployment falling and inflation under control, more Colombians will take loans. Housing starts in Colombia were at a higher number than those in the U.S, and mortgages are expected to increase. Cramer expects a credit revolution for the country, and CIB has a 14.4% growth rate with a multiple of 11, numbers he doesn't see for domestic banks. The company has a solid balance sheet and a 2.3% yield.

Cramer also likes Ecopetrol (EC), the national oil company and the only vertically integrated oil. The company is a play on rising oil prices. Cramer would buy both stocks only after waiting three days and doing homework.

Off the Charts: JDS Uniphase (JDSU), Microsoft (NASDAQ:MSFT)

While it doesn't matter where a stock has been, it matters where it is going, it is hard to buy a stock after it has had a huge run. The trouble is, in the recent bull market, there are very few stocks worth buying that have not already rallied. JDS Uniphase (JDSU) seems, at first glance, like a missed opportunity. It is up 217% since Cramer got behind it in 2009. The stock delivered what Cramer says is the best earnings beat so far this season and exceeded analysts' estimates by 10%, with a 38% increase in revenues year over year, 16% since last quarter, and a record 48% increase in gross margins and a 31% gain in its core test and measurement business which comprises 50% of its sales. The stock was up 27% on Friday morning from where it reported on Thursday.

It seems crazy to buy JDSU after such a bull run, but technical analyst Ken Shreve thinks JDSU is an exception to the rule that investors should wait for a stock to fill a big gap before buying. He used the example of (NASDAQ:PCLN), which rose an additional 34% after it gapped up in August. Why does Shreve think JDSU is going higher? There is huge demand for JDSU among big money and it isn't going away. December saw a series of dramatic rises for the stock in high volume and after a break, the same thing happened in January. Shreve thinks this is a classic sign of institutional buying, and predicts the stock can rise 51% to $44.46, although it might not go up in a straight line. Cramer agrees that JDSU has regained its motto "Just Don't Sell Us," especially with its gesture recognition technology used by Microsoft (MSFT) for the Xbox. Other gaming software companies will be buying JDSU's technology to keep up. Cramer would buy the stock ahead of its analyst day on February 17.

Gold Is Not a Trade: JPMorgan (NYSE:JPM)

It is official; Gold is a currency. Now that JPMorgan is accepting gold as collateral, it is clear that gold is not a trade but an asset allocation. Every money manager should be thinking not whether or not to buy gold but how much to own. With only gold comprising only 1% of institutional portfolios, Cramer thinks the yellow metal won't be even close to being overvalued until it is over 5% of the world's portfolios. Gold has a long way to go and can be bought here.


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