This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Jim Cramer: The Bellwether We've Searched For

Stocks in this article: DXCMSNNAGNMDT

NEW YORK (Real Money) -- Let's use DexCom (DXCM) as a poster boy for what's both right and wrong with this market.

Here's a company with disruptive technology -- a device to monitor glucose remotely with no finger pricking -- that's pretty much sweeping the Type One diabetes world by storm. The company's got a real edge over the other companies in the field, including Medtronic (MDT), and its device is truly a wonder, as I saw last night with my own eyes when CEO Terry Gregg came on Mad Money.

Gregg's a proven money maker. He had been president and chief operating officer of MiniMed, another monitoring company, and was instrumental in selling that company to Medtronic for $3.4 billion in 2001. He also served in executive positions with Smith & Nephew (SNN) and Allergan (AGN). He is no stranger to high-quality drug and device companies.

It is true that the patient population that might use continuous glucose monitoring systems is only 1.5 million and there is no epidemic of it, unlike Type 2 diabetes. But only 9% use a continuous monitoring system, and so there's huge upside. The accuracy is breathtaking and you can follow the levels remotely, something that every parent of a child with diabetes must want to do.

But here's the rub.

This is a company that is hiring so fast to meet the demand and is spending so much money on research that it is not making money. So, it failed to meet Street expectations and in this environment a company valued on sales per share that misses the estimates is just plain history.

So DexCom, which started the year at $35, rallied to $49 in that fabled first week in March when so many high-multiple momentum players collapsed, then cascaded down to $29 last week before bouncing to $31.

When you think of it, the company's successes spoiled the managers and some even had to sell because the position had gone up so much -- it was $11 exactly two years ago -- it was actually impacting their health-care weightings.

Now all of that has changed. It has become a down stock and it can't be valued on earnings per share. The catalysts of new products, the novelty of the iPad app, it just doesn't carry the weight that it once did.

But, and this is the interesting point, Terry Gregg sold Minimed for a valuation well in excess of what DexCom is valued at. Who is to say that if he is fed up -- which he didn't seem to me -- he couldn't do the same today? Who is to say that if the stock keeps falling, someone doesn't contact Gregg because this company's devices could be plugged into an existing sales force and hay would be made immediately?

I think there are a lot of me-too companies among the highfliers whose stocks have been and are getting pummeled. I think that there are many stocks that got way ahead of themselves and will not inspire a takeovers or be able to show a profit in time to salvage their stocks in this new chary environment.

But this company has proprietary technology with a proven CEO and tremendous momentum. It's the kind of company that someone else might want. Watch this stock. Put it on your screen. If the turn in momentum is ever going to be visible, it will come from a stock like this. DexCom's the bellwether for which we've all been looking. 

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

Editor's Note: This article was originally published at 7:30 a.m. EDT on Real Money on May 16.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs