Cramer opened tonight with a profile of Rosetta Resources, Inc. (ROSE), an oil & natural gas operator based in Houston. Cramer thinks this could be a $35 stock, as the current market value of the company is less than what was paid for the assets of now-bankrupt Calpine Corp (which now trades on the pink sheets). ROSE stock closed today at $21.06 but rose over 7% after-hours on the Cramer bounce
Rosetta was created to purchase the assets from Calpine, and paid about $1.5 billion for them two years ago, before big moves in natural gas and oil prices. Calpine didn’t have the capital to properly invest in the assets, something Rosetta has been able to accomplish in the past two years. In the 4th qtr of ’06 Rosetta posted $37 million revenue, up 33%, along with a 26% increase in production of reserves. The company is expecting even stronger production growth of 33% this year, which Cramer says is a unique opportunity to invest in an accelerating growth story within this sector.
A big overhang on the stock as been the possibility of legal action from the Calpine creditors, which have until Dec. 20 this year to assert “fraudulent conveyance” on the assets of Rosetta. Cramer doesn’t think the creditors will really come after the assets because of the positive performance of Calpine on the pink sheets and in the secondary bond markets, which may have the creditors appeased, and wary of a prolonged legal battle that they would likely lose.
Bob Rodriguez of FDA made a big bet on ROSE (he’s their largest shareholder) and Cramer thinks the guy knows what he’s doing. Cramer also thinks ROSE could be another Mirant, which announced it was shopping itself for sale today.
In looking for the next biotech stock that could perform like Nastech Pharmaceutical (NSTK), which made a 10% bounce last week, Cramer likes Incyte (INCY).
Incyte has end markets including HIV, inflammation, and cancer. Big end markets that Cramer says is vital for a speculative play. Incyte has no real earnings and no Phase III drugs, but he still thinks there are some stock drivers in the form of HIV and diabetes trial results later in the year. Any good news could make the stock a short-term winner, and solid cash balances should limit investors’ downside. Cramer would look to buy on Thursday, and sell on any profits in INCY stock.
In responses to phone calls, Cramer re-iterated buys on RIG and the other drillers; says today’s discrepancy between oil prices and the stocks of the integrators shows that the drillers can go higher from here. He also believes that Western Refining (WNR) got a steal when it bought Giant Industries (GI).
Cramer spoke out on Celgene, which he feels could trade for 70x earnings, and is still undervalued. Says pipeline is not being fully valued, due mainly to weakness seen at industry giant Amgen.
In other musings, Cramer thinks RIMM has already been through the worst of it, and would still be a buyer at these levels. And in a change of course, Cramer doesn’t think the XMSR/SIRI merger is going to be allowed to succeed by regulators; as a result he looks for Sirius to be the only one left standing as XMSR will go bankrupt first.
Other stocks named as buys were SHLD, MON, SPAR, THRX, VMED. Bullish calls were made on the aerospace sector, and Toyota Motors (TM) is a name that he would back the truck up on.
In a final note, Cramer postulated that once the DoubleClick dust settles, the losing bidders may want to gobble up aQuantive (AQNT) or ValueClick (VCLK). Based on the valuation that is likely to be paid for DoubleClick, AQTN and VCLK could have 33% and 31% upside, respectively.
Our regular Mad Money recap man, Jon Ogg, discussed this very possibility last week.
Enjoy your evening, and happy trading tomorrow…
Ryan Barnes
April 9, 2007
Ryan Barnes can be reached at [email protected]; he does not own securities in the companies he covers.
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