Shorts Might Have Overdone Lowe's

Lowe's (LOW - commentary - Cramer's Take) has been pummeled off the negative comments made by Central Garden & Pet (CENT - commentary - Cramer's Take) when that terrific little company missed its quarter.

On "Kudlow & Cramer" Friday, the CEO of Central Garden blamed the weather in the Southeast for the problems. Given the firm's excellent record, I have no reason to doubt Glenn Novotny, who does a great job at Central Garden.

It seems that hedge funds have picked up on Central Garden's woes and focused on Lowe's for a potential shortfall. Makes sense; Lowe's has a greater percentage of its stores in the Southeast than any other major chain that sells Central Garden products, so people are putting two and two together and putting out the short.

No doubt, this logic makes sense. But I have to wonder whether Lowe's is as much a hostage to the Southeast as the shorts have made it out to be. Specifically, I wonder whether Lowe's might be overdone on the downside.

My take: I would buy the September 45 calls here for $5. If the stock rallied, I would sell common against it. If Lowe's has a shortfall from here, it is going well below $45. If it doesn't, you can make a couple of bucks on the long side from the overextension by the shorts.

Neat trade.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."