Electronic Health Record Play
In the Thursday "Sell Block" segment, Cramer admitted he got it wrong when recommending Allscripts Healthcare Solutions (MDRX). He said while the stock is up 124% since he first got behind it, the company's lead rival, Cerner (CERN), has seen its shares rise by 319%.
Cramer said he got the theme correct, but bet on the wrong horse, as Cerner is clearly the better run company, with the better stock to prove it. He said while both companies work in the electronic medical records space, Cerner has the first-mover advantage and has superior technology that is more integrated between in-patient and out-patient facilities. By contrast, Allscripts began as an out-patient provider and has been having trouble integrating its software properly.
Cerner is also the market leader with 13% market share versus just 4% for Allscripts. Cramer said this gives Cerner a built-in advantage as doctors and hospitals are unlikely to change platforms. Cerner also has better visibility, noted Cramer, something investors love. Allscripts, meanwhile, has been having problems managing expectations.Cramer said the key metric for these health record providers are their bookings. Cerner had bookings up to $899 million in its most recent quarter, ahead of analysts' expectations. Allscripts saw bookings up 26%, but that number fell below expectations. Shares of Cerner trade at 28 times earnings and the company has a 20% growth rate. Allscripts has the same growth rate but trades at just 14 times earnings. Cramer said while this may make Allscripts look cheaper, investors are getting what they pay for in this case. Cramer told viewers if they want to be in electronic health records, Cerner is the stock to be in on any weakness.
High-Tech Oil RigsTechnology companies don't have to be in the tech sector, Cramer reminded viewers as he recommended National Oilwell Varco (NOV), a stock that largely trades lock step with the price of oil, but shouldn't be. Cramer said just like Apple (AAPL), a stock which he owns for his charitable trust, Action Alerts PLUS, dominates the personal electronics space, National Oilwell Varco dominates the technology used on oil rigs. So just how much technology is on one of today's oil rigs? So much that the company operates four technical colleges just to train enough employees to build and operate their equipment. In fact, deep-water drilling has largely been made possible at all thanks to super high-tech second generation drilling rigs. Cramer said that 86% of National Oilwell Varco's backlog consists of deep water equipment, but the company's technology also dominated in the on-shore space as well. Nearly 55% of all modern on-shore rigs also use the company's software and equipment, he noted, yet shares trade for just 12 times earnings. Cramer said National Oilwell Varco should be trading at one time its growth rate, a metric that would value shares some 60% higher than where they trade today.
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