Cramer Sees Ray of Hope for Mo Stocks

Publish date:

By James Cramer

Attention trapped momentum investors:


is coming to the rescue. Maybe there is a bottom to technology after all!

Wednesday's eye-popping bid for


shows that there is life after death for momentum stocks. Verifone had not once, but twice disappointed the mo crowd, which led to a cratering of the stock by funds who know only to sell until they are finished selling, regardless of price.

This time the sellers took the stock too low, so low that the business people at Hewlett took a look at the synergies and said, who cares if the mo-mo's don't like it, the businesses are good and the entry to new customers great.

For hybrids like me -- momentum, value, I don't care, I just want to make money -- this was a signal to cover the shorts on the down-and-out tech names because some are reaching fundamental worth.

In other words, the "short every

Pilgrim Baxter

name" strategy, if indeed that can be considered a strategy, may have reached the end of the easy money limits. From now on you have to be worried that a takeover could occur as some of these stocks approach levels that make sense for strategic buyers.

Before you bears out there say, whoa, all of this stuff is incredibly overvalued even down here, you know, some sort of Fleckenstein/Grant rap, let me tell you that I looked at buying Verifone just this week. I tried to make it work on earnings per share -- no way. I tried to make it work on price-to-revenues -- uh uh. I even tried to spin a case where the Internet businesses turned profitable ahead of schedule. Nope, still wouldn't matter. This thing was plainly overvalued as a standalone being.

But let's say you are a computer company that historically has not had much penetration with retail or with the gasoline companies. Your salesmen say, "Look, we just can't get in the door at


. They are a

Data General


Now, armed with the Verifone acquisition, you can go back to your salesmen who covers Texaco and say, "OK, you are in the door already, because Verifone dominates the pump credit card business, now go reintroduce yourself to the big iron guys."

Wouldn't you pay $1 billion for that entry?

James Cramer is manager of a hedge fund and co-chairman of

The Street.

While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to