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When Jim Cramer reads about senators in a huff over port security, he thinks it's time to own
, he told viewers of his "Mad Money" TV show Thursday.
Maybe you've never heard of this U.S. company, but Cramer said that it could be a great name in the homeland security space, along with such others as
Hidden beneath its health-care business, OSI Systems has the technology to make our ports safe, he said, since it offers systems under the Rapiscan Systems brand that can inspect anything, including baggage, cargo, people and vehicles.
"The real juice is in its security business," Cramer said. "This is where I think all the upside is going to come from."
He added that the Congressional Budget Office has earmarked funds for equipment purchases in security, and he thinks a lot of this will go to OSI.
The company has a baggage screening product called the HBS System, and is working on a PFNA system, which stands for Pulse Fast Neutron Analysis, that bounces neutrons off large containers to find out if their contents are safe, he said.
There are still bugs, but when this is perfected it will be used everywhere, Cramer said.
OSI is doing $60 million in its security business, and he said that number could balloon on contracts and government orders.
As far as its Spacelabs Healthcare unit is concerned, OSI owns it at practically book value, Cramer said. It's doing $200 million a year in health care revenue, and has a $350 million market capitalization. The unit has 40% operating margins and is resistant to a slowdown in the economy, he added.
OSI is losing money, he warned, but that's because it's spending so much on research and development.
"Ignore the losses in the near term," he said, because this should be big money in the long term.
Smoke-Free, Except for the Portfolio
U.S. cigarette consumption has hit its lowest level since 1951, but Cramer still believes there's money to be made in
, which he owns for his
ActionAlerts PLUS charitable trust.
The current population is twice as high as it was 54 years ago, he pointed out, and there are trends that are responsible for the downturn in smoking that are good for the parent company of Philip Morris.
Since cigarette advertising is largely banned, it is nearly impossible to introduce new brands now.
And even though smoking is no longer considered acceptable in most public places, even outside, tobacco is addictive and there will be smokers to buy the product.
But the real good news for Altria is the fact that the amount tobacco companies must pay as part of the 1998 big tobacco lawsuits is now set to decrease, Cramer said; and this will lead to better-than expected earnings.
Smoking is also becoming more restricted in Europe, but Cramer told a caller that the key is that lax smoking regulation in Asia will offset falling smoking rates elsewhere.
Rising Rents, Rising Stocks
reported that office space prices should double in New York City over the next five years because there isn't enough supply to keep pace with demand.
While this is bad news for renters and lessees, it's good news for office real estate investment trusts, and the REIT that Cramer likes the best is
Vornado Realty Trust
, which owns a large portfolio of real estate in New York.
He said that it has a "best of breed" management team, led by CEO Steve Roth, and that when it soon renews several leases in New York, it will do so at much higher prices.
There has also been a lot of consolidation in the group, and people feel that REITs are a perfect hedge against inflation, he said, adding that he recommends owning Vornado before it gets to $100. It closed Thursday up 40 cents at $92.55.
Rock of Gibraltar
CEO Brian Lipke joined Cramer to explain why the steel company is doing well, despite its exposure to the troubled auto market.
Gibraltar found a niche where it was able to establish product leadership position, Lipke said. And he added that a recent acquisition will also allow the Buffalo, N.Y.-based company to gain new exposure to the industrial building products market.
Cramer was bullish on
Applied Micro Circuits
Electronic Data Systems
Cramer was bearish on
Archer Daniels Midland
Research In Motion
Pepsi Bottling Group
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At the time of publication, Cramer was long Altria, Halliburton and UnitedHealth Group.
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