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Cramer's 'Mad Money' Recap: Heelys Worth a Roll

TheStreet.com Staff

12/06/06 - 07:51 PM EST

Click here for an archive of Cramer's "Mad Money" recaps.

Heelys, a footwear maker set to go public Thursday, could be "the last great fad initial public offering of the year," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

Market players look at fads as something too risky to touch, but according to Cramer they are opportunities to make money. He told his viewers to think of all the people who dismissed Crocs (CROX Quote), Under Armour (UARM Quote) and Zumiez (ZUMZ Quote) as fads, only to watch these stocks fly higher after their IPOs.

When approaching a "faddish" IPO like Heelys', Cramer said, people need to know their exit strategies.

Taking a look at Heelys' fundamentals, he said the stock has accelerated revenue growth, in addition to a fad that he considers "sustainable" and one that has "barely begun to penetrate its market." Heelys makes athletic shoes that feature a wheel in the heel, allowing wearers to switch from walking to rolling and back again.

The company sells about 4 million pairs of shoes a year, but that number could grow a lot more, said Cramer, especially since its shoes are aimed at a young demographic, and growing kids need new shoes a couple of times a year.

Comparing the Heelys offering to recent others of similarly faddish companies like Crocs and Zumiez, he said market players should be willing to pay $22 to $23 a share when the company goes public under the symbol "HLYS" Thursday.

Looking at the comps, Cramer said Heelys should be worth $26 a share eventually and it could even go to the mid-$30s.

The bottom line: buy Heelys in the low $20s and sell it as soon as it crosses the $30 line.

Am I Diversified?

In his "Am I Diversified" segment, in which viewers seek Cramer's blessing for their portfolios based on their diversification, the first caller offered the following five stocks:

Cramer called the portfolio possibly the single best one he's ever seen on "Mad Money" and blessed it as diversified.

His second caller held the following stocks in his portfolio:

Cramer said that although Family Dollar Stores is not his favorite retailer, the portfolio was diversified.

Cramer's final caller had the following five stocks:

Cramer told the caller he likes Marvell Technology (MRVL Quote), a stock Cramer owns for his Action Alerts PLUS charitable trust, better than Intel, but he blessed the caller's portfolio as diversified.

Level 3 Minded

Although Level 3 Communications (LVLT Quote) has "horrible sounding statistics" it is a triple buy, Cramer told viewers.

Level 3 has $6.8 billion of debt, no single quarterly profits since 2003 and a coupon of $9.50 because the market doesn't trust it, he said. In addition, he said, its debt is rated triple C- by Standard & Poor's.

But despite its mountain of debt and unprofitability, the company recently spent billions in cash on a buying binge, taking over a half dozen companies, and it plans to take over more, Cramer said.

"From everything you've heard, this looks like the mother of all stinkers," he said. "But I still believe it's a buy."

Cramer reassured his viewers that he has not lost his mind, and called Level 3 "a thing of beauty." Not only is the stock loved in the bond market, but it has accelerated revenue growth in the stock market, which is really what he believes matters.

He called it "the ultimate speculative growth stock for 2007," because, as a provider of bandwidth, it serves as the "backbone" for Internet video Web sites. In addition, Cramer said the bond-market thirst for high-yield paper could drive the stock higher.

Most analysts that cover Level 3 "despise it," but this doesn't trouble Cramer because he believes the stock is going to give long-term profits to market players.

Moreover, Cramer said he likes and trusts the company's CEO, James Crowe, as he made Cramer "a fortune" with the previous company he managed, MFS Communications. As far as Cramer's concerned, Crowe is "the real deal."

Cramer welcomed Crowe onto the show and asked the exec to talk about Level 3's stock.

"Our story is improving as we speak," Crowe said. "There was a period three years ago where things were rough ... but now we think we're in a pretty good position."

In response to people who would ask how Level 3 can shell out so much on capital expenditure when its EBITDA is just a little better than all its interest expense, Crowe said that Level 3 has "a pretty good cash position" with more than $1 billion in cash, which is "far more" than the company needs internally.

"We'll use the money to invest and grow," Crowe said. "In my view we are going to have bandwidth that grows at 60%, 70%, 80% for as long as the eye can see," he continued. "The future is about the eye and the video," as everything makes a move to the Internet.

Cramer said he believes Level 3 "is the best under $10 stock" he knows.

"This one is the real deal, and Mr. Crowe is the real deal," he said.

To view Cramer's interview with Crowe, click here.

Mad Mail & Sudden Death

In his "Mad Mail" segment, Cramer told viewers he believes Abbott (ABT Quote) is a good early way to play stents. He called it "an accelerated drug stock" and "a revenue growth story."

But he also said he believes Johnson & Johnson (JNJ Quote), which he owns for his charitable trust, Action Alerts PLUS, is the "safest" way to play stents.

When a mailer asked about JetBlue (JBLU Quote), Cramer said he likes Continental (CAL Quote) and UAL (UAUA Quote).

He said he can't like them all as airlines are losing money. Although Cramer said he loves the management at JetBlue, he said he still wouldn't buy it.

In the Sudden Death round, Cramer was bullish on Advanced Micro Devices (AMD Quote) and Bank of New York (BK Quote). He was bearish on Zoran (ZRAN Quote).

Lightning Round

Cramer was bullish on Apollo Investment (AINV Quote), Research In Motion (RIMM Quote), PepsiCo (PEP Quote), eBay (EBAY Quote) and BioMarin Pharmaceutical (BMRN Quote).

Cramer was bearish on Bank of America (BAC Quote), Regal Entertainment (RGC Quote), Apollo Group (APOL Quote), American Oriental Bioengineering (AOB Quote), Oracle (ORCL Quote) and S1 Corp (SONE Quote).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

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