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NEW YORK ( TheStreet) -- The havoc in the biotech sector may be too great to ignore, Jim Cramer cautioned his Mad Money viewers Monday as he advised investors to take profits in the group or wait on the sidelines until the carnage subsides.
Cramer explained that today's news that Gilead Sciences (GILD) may lose its virtual monopoly on treating Hepatitis C, news that sent shares down 14%, is cause enough for concern for all biotech investors. Competition is great for consumers, Cramer said, but it's a killer for companies and their stocks.
Just look at the phone companies, Cramer continued. Both Verizon (VZ) and AT&T (T) are down on the year, with T-Mobile (TMUS) down 21% and Sprint (S) shares plunging 61%, all because of increased competition.
The opposite of competition is consolidation, which is why the airlines have been soaring and why the drugstore stocks have also seen relief in 2014. Competition, or the lack thereof, is also why Facebook (FB) , which Cramer owns for his charitable trust, Action Alerts PLUS and a company with a monopoly on our virtual selves, is also having a very happy holiday this year.
For for the biotech sector, Cramer warned there will likely be more profit taking to come as investors sort out the new landscape, which could include more competition for hot franchises.
This Sector Makes Cramer Smile
What's the hottest performing group in market right now? Is it social media? Biotech? Nope. It's the dental supply stocks.
Cramer said there's a lot to like about the dental stocks. First, they aren't linked to where the price of oil is or how the Russian ruble is trading. They do, however, benefit from an aging population here at home and the fact that many people put off getting expensive dental procedures done during the recession. Add all that to the world's growing middle class and Cramer said it's easy to see why this is a red-hot group.
Of the group, Cramer said he likes Henry Schein (HSIC) the best. The stock is up nearly $8 since he spoke to the CEO last month, and shares are up 17% over the past three months. Stein is the number one player in the dental space but also has an animal health and vaccine business to boot, yet trades at just 23 times earnings.
Also on Cramer's buy list is Patterson Companies (PDCO) , the number two player with shares up 21% over the past year, and Sirona Dental (SIRO) , a high-tech provider of dental equipment with shares up 15% over the past three months.
In addition, Cramer mentioned Align Technology (ALGN) , makers of Invisalign braces, as a company with lots of upside but also more than its share on short sellers, and Dentsply (XRAY) , a stock he didn't care for given its exposure to Europe.