w Jim Cramer
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BRCD (BROCADE COMMUNICATIONS SYSTEMS, INC. )
If you really want to understand why a stock trades the way it does, you need to know its history.
There's just so much irrational sentiment that gets attached to a stock because of the way it's treated people in the past.
out what that sentiment is, and you've got a big edge on the people who
aren't paying attention to this kind of thing - or at least the people
who don't want to acknowledge that they're trading around their
is one of these stocks that is so tainted that it's difficult to mention it to people. You know (BRCD)
. Or maybe you don't.
They're a big maker of network storage devices. Especially network switches, where they're number one by market share.
I think you should buy (BRCD) right now!
before you do, let's have an understanding. Let's figure out the taint.
See, (BRCD) trades at a nasty discount - a big one - to its peer group.
trades at 21x earnings, compared to 25x earnings for its peers. (BRCD)
trades at twice sales; similar companies are trading at 3x sales.
(BRCD) is cheap. You're getting a deal if you buy it here, because it
trades at a discount to what I think are very bad reasons.
year, (BRCD) had to restate 3 years of their earnings because they
weren't accounting for options expenses. That hurt everybody who was in
But it's not why (BRCD)'s tainted. The stock's bad
history goes back a lot longer than that. Yeah, it goes back to the
stewardship of greg reyes.
I was still trading at my hedge fund
when (BRCD) created all that enmity that now surrounds it. And, in
fact, I owned (BRCD), so I'm well-placed to understand the irrational
hatred that pretty much defines (BRCD) right now.
(Train wreck sound effect)...that's what people think about (BRCD). I'm going to change that in this segment for you.
You can read about this in my first book, 'confessions of a street addict'.
was holding onto (BRCD) at $160. I watched the stock slide down to $140
in after-hours. This was a sickening decline for me. I was up 36% in a
year when the market was down. So this was just a big blotch on an
otherwise great year, and I was shamed and shameful, because I was
Now, I decided to cut my losses and sell
(BRCD), even though I would be selling at a loss. Remember this, your
first loss is your best loss.
I sold (BRCD), you know what? The thing just plummeted. It plummeted
all the way from $160 to $140 to $130 - I don't have enough time in the
segment to tell you it all. Single digits, and that's where it remains.
It had massive problems internally with the SEC
don't let your losses kill you. It's better to be saved by a small
loss, than wiped out by a big one, because you're afraid to sell a bad
cost below your cost basis.
A lot of people got burned by this
one - a lot of people. This was the ultimate nasdaq house of pain. And
a lot of other people saw it happen. That's why (BRCD) is so tainted
You know what will get rid of the taint? When they
beat they beat the numbers on their next earnings report in may. And I
am telling you - right here, right now, on mad money - that will happen!
will always beat sentiment in the same way that scissors beats paper.
At the end of the day, it just might take you a long time to get there.
Now, why do I think they'll beat the numbers? Let's talk substance and not just emotion.
make network storage products, and we've got just an unbelievable bull
market that has started in the last six months, in network storage.
After four long years of bear market, network storage is on fire!
are getting bigger and they've got more and more data to deal with.
It's that simple. It's so simple that MCDATA, which does network
storage - and may I just say, that I have historically thought that
mcdata was really an awful co.
So simple that network appliance
(NTAP) just beat their estimates. Hey, this business is really good
when all those companies are beating, and where these guys go, (BRCD)
They're still the
market leader in network switches. I can't believe, after all the
damage they did, it's still the darn market leader!
They don't just have new products. They've got new management that you can trust, that you can bank on!
chairman's a guy named david house. Hey, remember him? I do. I knew him
from the old days at intel. The guy should be running Intel - he's that
good. Instead, he's the chairman of (BRCD).
What's that mean? How about sell your INTC already - buy (BRCD)! Buy, buy, buy!
one last reason to get behind the stock: the whole network industry is
consolidating. People keep talking about (BRCD) as a takeover target.
Possibly even bought by CSCO, who just bought Scientific Atlanta.
(BRCD)'s that cheap.
Remember, we only speculate on takeovers where the fundamentals are improving. And they're improving at (BRCD)!
bottom line!: (BRCD) should be trading higher than it is. Their
earnings in may, or maybe a takeover bid, should break that taint! I
think you've got to get into (BRCD) before then!
Final remark (BRCD): If you pay up to $6, I think you're fine.
Cerveza Power Play!!
I know I always tell you to never, ever own a bottler. But right now, I'm changing my anti-bottling stance.
I don't want you to own bottlers in the U.S., but if you pimp to Mexico, there's a bottler that I think you've just got to own.
stands for Mexican economic development, and it may be one of the best beverage plays in the world. And you know I like that Diageo (DEO)
. You know I like the INBEV (INB.BR).
But this one is joining that - let's call it a triumph irate.
co. is the world's no. 2 Coke bottler and it's getting bigger because,
in Mexico, they've got a big poor developing co. And they love coke.
I take FMX
over pep, and I'll tell you why. Pep's a great co. Solid stock. Good
management. But it doesn't have anything like the kind of growth that
FMX is sitting on.
And, remember, we are growth addicts on Wall
Street. If you only get one takeaway on Jim Cramer's Mad Money, it is
that we will pay anything - there is no price that momentum investors will stop paying in order to get growth.
That's why I think FMX will make you money!
be honest, it's not just about Coca-Cola, this FMX. See, FMX - second
largest brewer in Mexico. I'm sure you've had one of these, huh - Dos
I know beer in America is not in good shape but beer in
Mexico is another story. Witness the fact that Mexican beer sales were
up 8.4% in the qtr. Wow!
High single digits may not sound great
to you, but this is a beverage co. We're talking about. When I saw that
figure, I said 'stop trading!'
Then, there's the icing on the cake. FMX
runs the largest chain of convenience stores in Latin American., Oxxo,
and guess what beers and wines they feature? Can you imagine if bud
owned 7-eleven? That's why FMX has what I think is a hammer lock on the
kind of quick-to-get beer that every convenience store sells so much
of. that's why it's worth owning.
The bottom line!: you've got to go to Mexico to find a brewer or a bottler that I like, and the co. is FMX!
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