Cramer's Mobile Internet Tsunami Stocks

( Editor's Note: Also see Jim's diversified dividend portfolio from Jim's best-selling book "Getting Back To Even".)

Right now, though, for the first time in a decade we are seeing the beginning of a brand new product cycle, one that is truly gigantic and represents the first true secular growth trend that the market ultimately falls in love with, the kind of trend that can cause enormous, multi-year runs in the stocks that are plugged into this product cycle. What's the trend? The product? It's something that young people, really anyone from the age of 20 to as old as 35--you can see how I'm showing my age here--are uniquely able to understand and perhaps not be able to live without. It's something that should be accessible to you in an intuitive way, even as it's very difficult for older money managers and analysts to grasp because they didn't grow up with personal computers, the Internet, and cellphones. I'm talking about the mobile internet, an idea that encompasses many different devices, but is exemplified by the smartest of the smartphones the iPhone from Apple ( AAPL) (AAPL), the PALM ( PALM) (PALM) Pre, and the whole line of Blackberries from ( RIMM) (RIMM). What do I mean when I say these smartphones embody a new product cycle--the biggest product cycle that we've seen from tech since the initial rise of the Internet and maybe even bigger? I mean that devices like the iPhone, which contain a multitude of different applications and allow you to be constantly hooked up to the internet and navigate it just like you would on a computer, are fundamentally changing the way we use technology to the extent that owning a smartphone is not a luxury or a fashion statement, which is how Wall Street understands this move, it's in fact a necessity. The premise here is that there some ideas are so powerful they can dramatically change the technology in a given industry, or allow us to do something that was previously impossible, or make something that had been incredibly difficult and expensive into a process that's easy and cheap.

In his book "Only the Paranoid Survive" Andy Grove, the brilliant former CEO of Intel, called moments where these ideas took hold 10X changes or 10X tsunamis, because they allow us to do things 10 times better. Mobile internet is one of these 10X tsunamis--it's not just about the iPhone or the Pre or the Blackberry. The idea is that mobile devices which allow you to access the web have so proliferated that the way we use expect to interact with the Internet and with information has fundamentally changed. It's not that, all-of-a-sudden, we have cool new products like the iPhone, it's how these devices are becoming a huge and indispensable part of our daily lives. As more and more people feel the need for these products, it's going to drive sales at Apple, RIMM and PALM, as well as their suppliers, the parts makers, the software writers, even the retailers and vendors of the products, much higher than anyone would ever have imagined. Younger people can understand this concept--this theme makes sense as part of your everyday lives.

The idea that the mobile internet could be every bit as revolutionary as the switch from snail mail to email, and just as important and game-changing as the move from the typewriter to the personal computer, or from print to the web, makes intuitive sense to you. But few older people, especially not on Wall Street, can see this groundbreaking new technology for what it is, something ten times bigger than any trend out there, something worth potentially hundreds of billions of dollars in revenues and ultimately in stock market wealth creation. That gives you a huge edge on the investing competition.

And it doesn't hurt that these are the companies you're intimately familiar with: Apple, Palm, Research in Motion. You like their products and you buy their products, you understand their appeal. That, alone, is never a good reason to own a stock, because what we care about more than anything are the fundamentals, how a company is performing, whether it is actually making any money. But it is helpful if you already believe the fundamentals are strong and getting stronger.

These smartphones are becoming every bit as necessary as, say, our ability to read the papers on the Internet, or watch TV with cable rather than rabbit ears, as surely as we text instead of call and take pictures with phones and not cameras, and just as surely as we now watch TV on our computers, even our handheld ones. Devices like the Pre, the iPhone, the Blackberry, they're the little gadgets that do everything, especially now that so many applications have been released on the iPhone, turning it into the Swiss-army-knife of smartphones. These are game-changing products that essentially make just about every other gadget out there irrelevant. Camera, check; music player, check; email, check; phone, check; web browser, check, and countless other, less important things. They represent exactly the kind of technological leap that takes everyone by surprise--everyone except for younger investors who get it.

Yes, I am transparently trying to entice you into the stock market by using hot, interesting stocks that you know and like, but they also embody one of the strongest product cycles I have seen in ages. Nobody on the Street is expecting that everyone will need something like an iPhone in the same way that it's now expected that virtually everyone has access to a personal computer, but that's exactly the way things are going.

Frankly, I am indifferent as to which of the three major smartphone companies you may want to own. Palm's the most volatile and perhaps the most risky. It has the shortest track record of the three--from the time the Pre launched, it's been a darling but the company's long-term record doesn't give you much comfort. Still, this is the company that is most likely to be acquired for its technology by an outfit like Nokia ( NOK) or Ericsson or Samsung because it is so revolutionary. Research in Motion is just a well-oiled machine, one of these companies that reinvents itself with each new iteration of Blackberry. The company, with superb, intense management, reminds me of the Intel of old, the one that doubled and double and doubled again with each new product.

Apple's simply the best-run company in America, with or without Steve Jobs, and in many ways it is the complete package as the iPhone just complements Mac computers and the iPod/iTunes business. But Apple's the most known and therefore, perhaps, the most played out. Still, I would own it in a heartbeat if I were younger and wanted to bet that the company will maintain its market leadership, and expand it beyond individuals to corporations, something it's been unable to do until now.

When you get a product cycle that strong and multi-year, it spreads and lifts all kinds of ancillary plays--everything that goes into one of these phones or supports the networks they rely on can go higher. As I say on Mad Money when I go to my soundboard and press the sound of a bowler nailing a strike, there is tremendous "pin-action" off of each of these devices.

So, if you think that Apple, PALM and RIMM are too over-exposed, I can give you a menu of the stocks of other companies that go into their devices, that are also part of the mobile internet product cycle, and you can do an hour of homework to determine if you think any one of them in particular is worth owning.

What's being carried along by this huge mobile internet wave? Starent Networks ( STAR) (STAR), the enabling structure to allow phone companies to deliver multimedia services on the phones, Analog Devices ( ADI) (ADI), RF Micro ( RFMD) (RFMD), Skyworks Solutions ( SWKS) (SWKS), Texas Instruments ( TXN) (TXN), and TriQuint Semi ( TQNT) (TQNT) the builders of smart chips that allow the devices to maintain and transmit so much data, Broadcom ( BRCM) (BRCM) and Marvel Technologies ( MRVL) (MRVL), which make technologies that integrate broadband into the devices, and Sandisk ( SNDK) (SNDK), which allows them to store information and retrieve it with lightening speed.

Perhaps the best way to play this new product cycle is with Qualcom ( QCOM) (QCOM), which is the largest position in my charitable trust, which you can follow along at www.ActionAlertsPlus. Qualcomm is the company that created the technology that makes so much of smartphone intelligence possible--it's the reason you can get such terrific Internet access on your phone. It's the brains not just of one, but of all the wireless outfits. Wireless infrastructure is being built around the globe to support Qualcomm's brand new chips, its G-4 line, so the company's role in this tech tsunami's just getting started.

Why am I confident that we have so many years ahead of us for this smart phone product cycle? First, only about one in one hundred cell phone users have smart phones that can surf the internet and handle most of the more intensive and addictive applications. Second, most developing countries are skipping landlines entirely and putting in infrastructure that enables these phones to work everywhere, including a $40 billion program just kicked off by the Chinese government. Finally you have the backing of our own huge telco carriers-- Sprint ( S)in support of the Pre, AT&T ( T) in support of the iPhone, and Verizon ( VZ)in support of the Blackberry. That's important because without these new phones these companies can't expand or perhaps even survive. Therefore, they can be counted on to subsidize the purchase of mobile internet devices for years to come.

If you're young, or young at heart, I seriously recommend checking out and investing in one of these stocks--you can't build a portfolio just out of the mobile internet trend as it would be all tech and totally undiversified, but you can afford to take a big swing at one or two of them because you have your whole investing life ahead of you. That's right, think of it, you have not one but two incredible opportunities as a young investor, the chance to buy stocks that have been knocked down to insanely low levels, and an intuitive understanding of what could turn out to be one of the biggest moves of a lifetime, a huge new product cycle in tech based around smartphones, led by Apple, Research in Motion, and Palm, and followed by everything that makes their devices work and keeps their wireless networks running. If this is anything like previous product cycles in tech, and it seems akin to if not bigger and better than the largest ones, it will take years to wear itself out.

Still, don't lose discipline. Don't be greedy when these stocks are up. Younger investors can afford to let their gains run longer and not be as sensitive to taking profits in their winners, especially in a scenario where I expect multi-year profits. Nevertheless, even if you're young, you should still gradually sell off parts of your position in any of these stocks as it goes higher. Scale out slowly over time. Don't sell all at once, but incrementally so that eventually you're playing with the house's money, meaning whatever money you have left in the stock comes not from your original investment, but purely from the profits you've already made. Then just don't touch what's left; you're playing for free!

For younger investors, you can afford to wait longer before you start taking stock off the table, but anyone who's older, if you're reading this, you must adhere to my method of scaling out, because unlike someone in their 20s, you simply cannot risk turning big investment gains into losses. If you want and you have the time, you can use call options as stock replacement to limit your downside, but that requires more time and effort. Anyone can play the tech tsunami, but it means that for those of you who are still in your 20s or early 30s, I can't make it any more simple than this: there has never been a better time for you to start being an investor than right now. Promise me you will take advantage of it. Now see Cramer's diversified dividend portfolio>>
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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