Smartphone? Smart Play

Does it have smartphone exposure, or doesn't it? That is the question. When I look at what's moving in tech and what's become sullen and gloomy, there's only one compass: smartphones. Think about what's moved this week: Cree (CREE - commentary - Trade Now), Tellabs (TLAB - commentary - Trade Now) and ADC Telecom (ADCT - commentary - Trade Now). These are terrific plays in the smartphone food chain and are included in the "Mad Money" Mobile Internet Index.

ADC Telecom is Chinese Internet infrastructure, and we know that China's spending $40 billion to build out infrastructure that can allow aggressive adoption of smartphones. Tellabs has been waiting for next-generation telecom orders -- smartphones. I think the fact that it announced a giant buyback -- it matters when the stock is this small -- is the signal needed to suggest they are getting orders.

Cree's the lighting play off of the smartphones. That stock's been on fire for ages, but this recent number and the propulsion after reminds us of how big this category can be.

Remember, Apple (AAPL - commentary - Trade Now) cannot meet demand for AT&T (T - commentary - Trade Now) for smartphones, and the China Unicom (CHU - commentary - Trade Now) order hasn't even hit yet! Kaufman Brothers says Verizon's (VZ - commentary - Trade Now) BlackBerry sales are incredibly strong, and the competition from sell-rated (by me!) Palm (PALM - commentary - Trade Now) has receded. Morgan Joseph agrees this morning in its downgrade to "sell" with a $7.50 price target. Looking like a one-hit wonder there because of returns and because of a lack of applications -- Apple's strong point. Obviously Apple remains the easiest call in the group, with Qualcomm (QCOM - commentary - Trade Now) not far behind. Both have been stalled; both, I believe, are ready to break out.

If you are looking to parse wheat from chaff, ask yourself, "Does it have smartphone exposure?" If yes, buy on weakness. Heck, buy on strength!

Random musings: I like Helene's piece in her terrific "Top Stocks" newsletter on high put-buying yesterday. No one believes. ... Doug Kass may be right about Paulson's potential flipping. But I say follow the money to Regions (RF - commentary - Trade Now) and Fifth Third (FITB - commentary - Trade Now), the latter's doing really well. Readers report that RF has good earnings power, though, and could trade to $7.50 book as it has huge reserves. Call me skeptical as long as Wall-of-Shamer C. Down Ritter is running the joint. ... Martin Sumichrast is out over on flagship with a must-read on how he's recalibrating his portfolio -- great stuff.

At the time of publication, Cramer was long China Unicom and Qualcomm.

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