F5 already enjoys huge gross margins nearing 83%, thanks to its growing software segment, Cramer explained. Now that the stock has gotten cheap and is likely to get even cheaper, that makes the stock attractive for the first time in a long while.
Networking equipment makers trade on their product cycles, which is why F5's revenue were down 10% last quarter -- the company is gearing up for its biggest refresh in over three years. Add this to easy comparisons and it's easy to see how F5 can beat the estimates and surprise Wall Street.
F5 is also a story about timing because the company reports right at the debt ceiling debate in Washington hits later this month, he pointed out. That will likely cause the stock to go unnoticed, at least until its analyst day on Nov. 14 when, hopefully, Washington is off the front page. Given the huge amount of cash on its books, Cramer said F5 will be one stock to watch going into the end of the year.
Focus on Franks International
Investors need stocks that can transcend Washington, and that's why Cramer turned his sights on an oil service initial public offering, Franks International (FI), which came public two months ago but was founded in 1938.Cramer explained that Franks manufactures the pipes and casings the oil drillers and offshore drillers need for their wells. The company competes with Weatherford (WFT), but unlike Weatherford, which only has 6% of its revenue coming from pipes and casings, Franks is almost a pure play. What makes Franks so attractive? Cramer said the company has the opportunity to take share from Weatherford as that company struggles with accounting issues. Franks also focuses on offshore drilling, which is the fastest-growing segment of the industry at the moment. Unlike other oil services, once rigs begin using a certain type of casing, they're unlikely to switch. This gives Franks a "stickiness" not seen in the rest of the industry. Cramer said Franks is also a technology company and holds many patents that make its services unique. The company has a solid balance sheet with almost no debt and only came public to use its shares as a currency for upcoming acquisitions. With 43% gross margins and solid growth prospects ahead, Cramer said Franks is shaping up to be a real winner in the industry, especially with shares trading at only 19 times earnings.
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