The Anatomy of Cramer’s Call on Micron

Jun 24, 2011
J. Webster
Comments Off on The Anatomy of Cramer’s Call on Micron

Jim Cramer
AP Photo

The reason Jim Cramer was probably such a successful hedge fund trader: he wasn’t afraid to sell stocks when something changed with the company or the industry itself. He wasn’t married to stocks, as they like to say.

However, if you’re a home gamer, as Cramer likes to call those traders who watch his Mad Money show on CNBC, it can be tough to time correctly when to get in and out of stocks without getting severely burned to a crisp, especially if you’re relying on Jimmy Cramer for when to do so.

One stock that Cramer was in love with recently was Micron (MU), calling the stock the next Nvidia.

“Cramer thinks Micron Technology could be “the next NVIDIA,” as the company’s switch in focus to Flash memory from DRAM is exactly the right move in this age of Apple tablets and the like.”

As a result, he said, “I think you could have a very big move here in MU.”

When did Cramer say all of this? This was on January 24th of 2011, when Micron was trading around $10 a share.

Cramer then went on to say that Micron was one of his top picks of the year:

“Cramer called MU his top speculative trade of 2011. He likes it because Micron provides products to Apple.”

When Cramer said this, on February 4th, 2011, Micron was an $11 stock. What’s key here though is Cramer called this stock his top SPECULATIVE trade of 2011. So he did frame this pick as risky.

The stock traded up near $12 a share but mainly hovered around the $10 mark for nearly six months, before getting hammered today after they posted earnings of just 7 cents a share, missing the average analyst projection of 18 cents a share.

Micron said the miss was due to weak PC demand and slowing in Japan, but also said tablet demand was strong. Micron’s DRAM chips are for personal computers and the NAND chips are for tablets. So Cramer was right on the NAND memory part used for tablets being the new driver of the stock going forward, but just not that right. And of course, nobody could have predicted the Japanese disaster.

Yet the home gamers most likely bought in on Micron at around $10, loaded up the truck as they say, going for it, and are now looking at a 14% drop after Micron’s earnings release, coupled with the stock dragging along for the past few months around $9 a share. Cramer did weigh in on Micron on June 17th 2011, a week before Micron’s earnings release with the message to get out, but it was a bit late in the game as MU was trading below $8 a share.

“The trade on this one is over, Cramer said. Sell, sell, sell.”

To me, if you’re going to follow Jim Cramer, buy what he buys when he says so, you’ll have to join his Action Alerts charitable trust, where you’ll see exactly when he’s buying and selling his stocks, otherwise you’re going to get fried to a crisp when the stock goes against you. I’m guessing that Cramer weighed in on what he was going to do with Micron’s stock well before June 17th, just a week before their earnings release.

What’s funny, well not that funny if you’d bought Micron around $11 a share, is that now is probably the time to start building a position in Micron, after this big sell off. The iPad and tablet crazy is a real one, and MU is in this game with their NAND memory chips.

What’s interesting, and seems to generally hold weight, is that once the pundits on TV start pushing a stock is when it’s getting near time to sell the stock. And when the pundits or so called experts on TV are slamming a stock, it just might be the time to look at buying or building a position in the stock. Can you say contrarian investing? Yes.

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