NEW YORK ( TheStreet) -- "In this market, bad news is just another way to say 'buying opportunity,'" Jim Cramer told the viewers of his "Mad Money" " TV show Monday. He said that over and over again stocks have gotten pummeled on bad news, only to see the buyers swoop in and overwhelm the panicking sellers. Case in point, Kulicke & Soffa Industries ( KLIC), a semiconductor equipment maker that delivered severely disappointing guidance. Cramer said normally bad news like this would take down the whole semiconductor group, but this time the group rallied, with Applied Materials ( AMAT) ending higher on the news. Then there's John Deere ( DE), a stock that also delivered negative guidance and garnered several analyst downgrades as a result. Cramer said these downgrades were the cue to buy, as Deere has added $7 a share since the news. Cramer said there are countless other examples. Kids' apparel retailer Gymboree ( GYMB) was downgraded last week on disappointing same store sales, only to rally hard this week on news the company is going private. JC Penney ( JCP) got hit for $19 a share on disappointing news at the end of August, but has added back $14 a share in the weeks that followed. And the list continues, said Cramer, from Boeing ( BA) to Nucor ( NUE). The pattern is to get hit on negative news, then skyrocket afterwards. Cramer said it's time to forget about what the short sellers are up to and focus on the positives. Bad news is a buying opportunity.
Orphan Drug Play"The orphan drug business is, perhaps unfortunately, a lucrative one," Cramer told viewers as he kicked off a week long series on biotech stocks that look like Genzyme ( GENZ), a company which just received, and rejected, a substantial takeover bid. Cramer explained that orphan drugs are those designed to treat only a small number of patients, and as such, receive special incentives from the U.S. and EU such as subsidies, increased patent protections and other benefits. He said that one unfortunately downside to this model is that companies are free to charge whatever they wish for their treatments, and in the case of Genzyme, can range between $250,000 to $500,000 a year. Cramer recommended BioMarin Pharmaceuticals ( BMRN) his first company that could become the next Genzyme. He said BioMarin makes enzyme replacement therapies, similar to that of Genzyme, and those therapies currently fetch around $300,000 a year. BioMarin also has other drugs in its pipeline, and is having an R&D Day on Oct. 19. Cramer said he would consider getting in ahead of that analyst day. Next up on Cramer's biotech list, Alexion Pharmceuticals ( ALXN), a company he recommended on Aug 14, 2008, and one that's up 43% since that call. Cramer said Alexion's main product, Soliris, treats rare blood diseases, and the company is in trials to treat new conditions with the drug. Alexion is having an analyst day in mid-November, and Cramer said now may be a good time to consider getting in.
Bargain Energy StockWhat's the definition of a bottom? Cramer said in the Cramerican dictionary the entry for "bottom" includes a picture of Chesapeake Energy ( CHK). Cramer said that Chesapeake has simply gotten too cheap for words, and barely moved on the news it's selling one third of its acreage in the Eagle Ford Shale region to a Chinese oil giant for well above market value. According to Cramer, the deal should have added $7 a share to Chesapeake shares, but instead the market only gave the stock a 25-cent boost. Why the discrepancy? Cramer said it's because Chesapeake has become hated on Wall Street, thanks in part to its history of over-levering itself and its dependence on high natural gas prices to survive. But Chesapeake is changing, said Cramer, and is more disciplined and is diversifying away from natural gas and into oil. In fact, the company has publicly stated that it's reducing spending on natural gas until prices increase back to $6 per cubic foot. Cramer said Chesapeake has a lot going for it, including an analyst day on Wednesday. Cramer said he expects to hear about additional deals, as well as the company's plans to transfer its pipeline assets into a master limited partnership. What's a fair valuation for Chesapeake? Cramer said the company grew its reserves by 59% between 2006 and 2009, yet the enterprise value for the company only grew by 21%. Compare that to rival Devon Energy ( DVN), which grew reserves by 58%, but saw its value increase by 77%. Using these metrics, Cramer said Chesapeake should be worth $73 a share, over double its sub $24 share price at today's close.