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"The oil drillers have bounced back," Jim Cramer told "Mad Money" viewers Friday. That's why he believes it's time to look at
( SELA), an unlisted stock that trades over the counter, Bulletin Board style, under the ticker SELA.OB.
Typically he doesn't like these stocks because they're dangerous and risky, he said. But Seitel is different because it's a lot bigger than the average Bulletin Board stock. Since its trading volume is decent, a lot of the risks are taken out of the equation, he said.
Plus, the stock is trading this way because it's coming out of bankruptcy, and he believes it will be listed with the
this time next year.
Seitel has the largest "multiclient onshore seismic database in North America," he said, with 34,000 square miles of 3-D data and 1.1 million linear miles of 2-D data.
If we're in a drilling boom, he said, oil and gas exploration expenditure should increase by 15% this year.
Plus, the government has forgiven the royalties that drillers might have had to pay, and Cramer said that they won't just sit on this money. Companies will invest in new drilling. To get started, they'll have to spend money on data from Seitel, because they need to know the lay of the land before they drill anywhere.
The company just became profitable again last quarter, and Cramer attributes this to an increase in drilling activity, adding that the company will continue to be a "cash-flow machine."
The company's story is the "anatomy of a good recovery," he said, and it has exceptional operating margins.
Here Come the Robots
Robots seem inescapable, because workers are being replaced by machines, Cramer said, not just by cheap foreign labor.
Manufacturers in America face two problems, he said. The first problem is rising input costs, including rising wages for labor, more expensive raw-energy costs and higher energy prices.
The second problem is that they have limited pricing power, meaning that they can't raise prices too high. So they have to cut costs by becoming more efficient, and Cramer said that means replacing humans with machines.
An industry report said that in 2005, North American companies placed orders for 18,228 robots valued at a total of $1.16 billion. Cramer said that's a 23% unit increase and a 17% dollar increase.
He said that the way to get rich off of industrial automation is to buy
, which makes industrial animation systems, and
, which makes controls.
Both companies beat their first-quarter numbers by a mile, and based on their P/E ratios they are inexpensive stocks.
Homework Case Study
Want to think like Cramer so you can buy like him? He took viewers through his homework on the stock
to show how it's done.
He began by checking out a research note from Morgan Stanley that said investors should buy Glenayre because it looks ready to break out. He's not a technical analyst, but he listens to them, and he decided to further investigate the maker of messaging systems and manufacturer of CDs and DVDs.
He said that he hasn't thought about Glenayre in six years because of some legal problems and the fact that telco went through a bear market.
But he believes that telco is back from the dead; and the technical research from Morgan Stanley matched up with his fundamental thesis.
Then he read other research reports on the company, since it's not okay to rely on just one report. He cited one published by an analyst at Morgan Joseph that was bullish on the company, too. The report said the company just made a good acquisition and has a "hammerlock" on CDs for Universal Music.
Plus, its legacy messaging business didn't look bad in the report, and the company's revenues jumped by 54% in 2005.
After reading up on Glenayre, Cramer found that the company has the added advantage of being profitable. And he said that if it sells its messaging business for a lot of cash, it could then focus on its CD and DVD business. This could make the stock more attractive by making it easier for Wall Street to understand, he said.
Glenayre has more cash than debt and a good balance sheet, too, he said.
That's a lot of research, he said, and that's what he believes all investors should do before they put their money on a stock.
G-III's New Seasonless Ticket
Cramer welcomed the chairman and chief executive of
G-III Apparel Group
, Morris Goldfarb, to talk about why the company's earnings suffered.
Goldfarb agreed with analysts that the company got nailed because warm weather kept consumers for buying its winter wear.
But Goldfarb said that the company is diversifying out of just winter-weather clothing. In fashion licensing, the company will work to produce a line for
that will come out multiple times a year, making it seasonless. And it has added Calvin Kline's suit business, too, Goldfarb said.
To view Cramer's interview with Goldfarb, click here.
Cramer was bullish on
RF Micro Devices
Cramer was bearish on
Distributed Energy Systems
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