Tuesday, 07/01/08
Posted 07/02/08,  07:21 am ET

(Scroll down to see Jim's comments below)

 
 
Today's date:  Tuesday, 07/01/08

  Dow Jones: 11,382   + 32
  NASDAQ:   2,304   + 11
  S&P 500:   1,284    + 4
 
 
 
 
 
First Segment
   
Opening Segment 1 Title: 'Prescription For Profits'

.  .  .  .  .

Featured Stock(s):

Allscripts Healthcare Solutions Inc. (MDRX)

See Opening Segment 2, below...

 
After this segment, you can see Jim's Lightning Round picks here...

.  .  .  .  .

JJC:   I'm just glad that last quarter is over and the new one has begun... We caught a rally today... A nice turnaround from the lows... And once again, we saw leadership from a group that people have hated all year... And that group is Healthcare...

So what are we doing?...

We're pressing our advantage here... Seeking the safety and comfort this week from the federal government and its latest cooperate giveaway: the Medicare boondoggle, the Medicare bill... The healthcare stocks are finally starting to work anyway. We got the wind at our backs... But the ones who benefit from the Medicare bill should do even better than the whole healthcare group... But you got to read the fine print to figure out what that might be... And we have read it for you... But that's why you tune in, isn't it?... That's why we watch Mad Money... Because we're here... We've done the work...

And we've got three more stocks to follow up on the Fresenius Medical (FMS) that we recommended yesterday... By the way, the German papers were incredible... Bleebleeblee... Mad Money.... Bleebleeooblah... Fresenius... That's my own translation...

Anyway, I think these stocks are poised to feed heavily at the federal trough, which could make us tons of money off of this Medicare bill... Proving once again, that we do have blessedly, a government for, by, and of the cooperation, just like Lincoln wanted... Maybe not... Anyway, God bless America for that...

So who's the next player to benefit from the Medicare largess?...

I think its a stock that has lost people a lot of money in the past... One that I have disliked, one that I have trashed, tarred, and feathered...

And the winner is... Allscripts Healthcare Solutions Inc. (MDRX)... The top company for electronic medical records and electronic prescriptions... Now, normally I'd stay away from a stock that dropped from $28 to $8 in a blink of an eye, even if it rebounded at $12.16 now, booyah... But because this Medicare bill seems like it could be so favorable for this company, I'm sticking my neck out, and perhaps other body parts, and recommending it. See, the Medicare bill contains both incentives for using e-prescribing systems that will run from 2009 to 2013...

And an e-prescribing mandate that will penalize doctors and hospitals that don't start using e-prescribing software by the end of 2010. This part of the bill has huge bi-partisan support, perhaps the only thing in the world other than ethanol that is bi-partisan support... It's in the both the House and Senate language. Now, I think it could be exactly what a company like MDRX needs to get itself into gear... Because doctors have been notoriously slow to adopt their new technology, which I think is part of the reason it dropped so precipitously. They want to keep using their awful handwriting... They want to keep using the same old, same old, that result in pharmacy having to call the doctors office 30% of the time because the print is illegible for these crucial drugs... Not to mention the numerous accidents that occur... Like that kind of senior, remember George Bailey?... You know, Farah Fielday in "It's a Wonderful Life"... Paper medical records are so wrong, they're almost as bad as lawyers, who still think a word processor is a stooge sitting in front of a typewriter, not a computer program... But now that the government is going to start providing pay incentives for using this software and penalties for not using it, physicians and hospitals actually have a pretty good reason to change their evil ways in order to protect the bottom line.

Why MDRX?... After digesting its recent merger with Misys Healthcare, a deal that's expected to close in the third quarter, MDRX should have a client basis of roughly 150,000 doctors and 700 hospitals... That's a quarter of the doctors in the US. MDRX has relationships and sells software to all of these doctors, but e-prescribing, the e-prescribing market is still small... Only 2% of the 1.47 billion new prescriptions and renewals eligible for election rally were transmitted electronically in 2007... Hey, that has enormous room for growth and big addressable market, Wall Street jibberish for people you sell to... Especially with the e-prescribing mandate coming down from Congress, which might as well just be a check made out to MDRX... As they're already selling software to a huge portion of the market, thus I believe, are poised to capture the new e-prescribing business that the Medicare boondoggles will bring. This is exceedingly bullish... Buy, buy, buy...

Also, MDRX has a product called ERX, now it's software that they give away for free so doctors don't have to invest in new hardware or even pay for the software... This is a great Gillette kind of razor blade business model if you know what I mean... MDRX gets paid whenever there's a transaction, but there aren't any upfront costs. The main thing that MDRX precipitously from $28 to $8 was its failure to deliver on its electronic health records platform. There were bugs and the company had execution issues, given it was trading at 60-times earnings, any little slip-up would send this stock to growth purgatory, and its share holders, frankly, to Hades, for losing 20 straight points. That's exactly what happened... But, according to MDRX, they expect to resolve this issue by the end of the year with a new less-buggy version of the platform...

And since this software has nothing to do with e-prescriptions, which should be the big driver going forward, I'm not going to worry about it too much, you shouldn't either. I think MDRX is a comeback stock. It gets 82% of its revenues and over 90% of its profits from its software services division, which provides e-prescribing solutions... And the number of prescriptions filed electronically are expected to grow by 400% this year. The stock is at 18-times earnings, 40% earnings growth, long-term growth rate of 23.5%...

I think this stock has been punished enough. When you're a high-flying momentum stock and you screw up, you pay the price. But that's in the past now, especially with the help of the new Medicare bill, essentially mandating the hospitals and doctors to use MDRX's product. I think the stock is going to get its 25 multiple mojo back in 2009... We're talking a 44% gain, I see, ahead of time.

.  .  .  .  .

The Bottom Line!:      The Medicare boondoggle will pay doctors to use e-prescribing software, and penalize those who don't. I think Allscripts Healthcare Solutions Inc. (MDRX) is the leader here... It's the one I want you to own.

.  .  .  .  .

 

   
 

Stock Snapshots - Includes all stocks mentioned above

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)


MDRX

12.16

na

Allscripts Healthcare Solutions Inc. (MDRX)



     

 

 



See all of tonight's stocks' latest quotes on Yahoo! Finance



Most popular
investing books ordered:
(click any book to see at Amazon.com)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 


 

 


We need your help!
If you find our service valuable, your donation is critically helpful to support
our operating costs and is MUCH appreciated!
(click below to donate)

We are serving thousands of new visitors every day and our costs are growing as well.  Thank you for your support & generosity!


 


 
 

 

 

 
 
 
 

Mutual-Fund-Holdings.com
NEW RESOURCE!  See Ken Heebner's CGM Focus Fund
Top 25 holdings - The No. 3 Top-Performing Mutual Fund in 2007


 
 
Second Segment
 
Opening Segment 2 Title: 'The Next Medicare Bill Play'

.  .  .  .  .

Featured Stock(s): ResMed Inc. (RMD)

See RMD's official website here.

See the Yahoo! Finance profile for RMD here.

 
After this segment, you can see Jim's Lightning Round picks here...

.  .  .  .  .


JJC:    We're back, and we're still all about feeding at the federal trough. That was such a cozy nap... We're all still looking at stocks that could benefit from the latest government boondoggle... The Medicare bill.

Our next stock is a little different... It's a name that I think has been unfairly tarnished by the Street's misunderstanding of the Medicare policy... The company, and now you'll understand why I'm down here obviously on my Sterns and Foster, or what do we have?... Oh, even better, unknown Costco brand...

The company is ResMed Inc. (RMD), and it's one of the two biggest makers of the machines that treat sleep apnea, continuous positive airway pressure devices... We just call them sleep apnea devices for short, or machines... With 40% of the market share, it's in a happy duopoly with its' competitor Respironics, which was recently acquired by Phillips for a big win... And you know we like happy duopolies on this show... Here's the story of what I see as this stock's unfair fall from grace... The people who administer Medicare introduced a policy of competitive bidding that was announced months ago, only kicked in today in order to bring down the cost of sleep apnea machines and other durable medical equipment, which hurt our stock, RMD...

But we think the Street's been overreacting, because only 47% of RMD's sales are from the US, and of that, only 20% come from Medicare... So I believe the earnings won't be hit nearly as badly as Wall Street thinks... Plus, it's still possible that Congress will postpone the second round of competitive bidding... They tried to postpone the first round in that Senate bill that failed last week... But the first round began today and we still don't have a Medicare bill, so that chance is gone... The second round where competitive bidding will be rolled out to more locations won't start until the middle of 2009 and it could still be postponed... Look, it doesn't matter... Even if the second round of competitive bidding doesn't getting postponed, RMD's growth drivers in 2009 should more than offset the impact on earnings... Either way, either way I believe that the RMD situation is being undervalued and there's just way too much hand ringing, these people just have to take a nap... Alright, now here's the other thing that I think the Street is forgetting... This fall, the Medicare regulators will likely make it easier for people to get their sleep apnea machines... Sleep apnea, by the way, is one of the most under diagnosed illnesses out there... RMD estimates that there are 35 million sleep apnea patients in the US who aren't being treated... That's a big untreated market... The market for the sleep apnea machines themselves is less than 10% penetrated... Most healthcare situations are overdone, this is underdone... Both patients and doctors aren't really aware of the disease... But since there has been a steady stream of data connecting sleep apnea with diabetes, with hyper tension, and with obesity, along with data showing that improved sleep from sleep apnea machines helps those conditions, they're doing basically preventative medicine... I think that more people with those conditions will get tested for sleep apnea... Now mind you, and this is really important, this sleep apnea illness is quite different from another undiagnosed disease, wake apnea, which afflicts 90% of our critics in the media, ba da dom... Now in order to get a sleep apnea machine, a patient has to get a prescription to visit a sleep lab, somewhat like this one, without the Mad Money blanket... And because that's such a pain in the butt, 30% of patients who get the prescription don't go...

Now, here's the good news... On March 13th the federal agency that administers Medicare approved reimbursement for home diagnostic testing for sleep disordered breathing... Since RMD makes the machines that are used to diagnose sleep apnea, they sell the machines for $1000 bucks, the doctors get $200 from Medicare for testing a patient for sleep apnea... The economics for this is great for doctors in hospitals... This part of the Medicare boondoggle should be terrific for the business, as testing will be easier, more convenient, more profitable... Plus, it leaves some of the 30% of the patients who skip out on sleep labs should be fine with at home testing... And that should improve over all adaptations of sleep apnea machines... In other words, I see a big wave of sleep apnea machines coming, and RMD is definitely riding that wave... I think this stock could go as high as $50 or $53, giving you a 12-point gain from today's close, or 30%, as its been growing sales at 28% over the past 10 years, and has a long term growth rate of 21%... I think this stock is way underpriced... Even with it shooting up 7% today, which I wish it hadn't... I was working all week on this thing and I got bummed out because there are rumors of a possible bid from Germany's Limd Ag, and there are rumors in several Australian Newspapers, I read everything... But RMD said it knew nothing about a bid... I say throw in the takeover speculation, this one could go higher, but you know what, if there is no bid, the stock is going to give up the two and a half that it put on today so you wait for a pull back from today's rise. I wasn't going to not do this piece because I want to get this Medicare stuff in front of you, but it is not because I want to capitalize on some hair-brained takeover rumor... Let the stock come in.

.  .  .  .  .

The Bottom Line!:      The Street thinks that Medicare is killing ResMed Inc. (RMD), when in fact, I expect it to be a little less than a pinch... And they're so distracted by the Medicare legislation, they've forgotten to focus on the proposed regulatory change, that would give RMD a tremendous opportunity for growth, thanks to a change in reimbursement that allows people to be tested for sleep apnea outside of a sleep lab. I'm calling RMD a buy, buy, buy, especially right in the teeth of this legislation's passing. By the way, no medication whatsoever for wake apnea is currently available.

.  .  .  .  .

 

   
 

Stock Snapshots - Includes all stocks mentioned above

 

 

Jim
Cramer's
rating on
this stock

STOCK
SYMBOL

Closing
price
that
day

Opening
price
next
day

Full Company Name/Comments
(see comments above for each)


RMD

38.31

na

ResMed Inc. (RMD)

Price target:  $50.00-53.00

 

 

Go to the LIGHTNING ROUND from tonight's show here >>

See current quotes on Yahoo! Finance from tonight's show stocks here >>

Symbol keys:

A Charitable Trust stock. - An asterisk next to a stock symbol indicates that Jim mentioned it is a stock that he manages within
his charitable trust portfolio.  You can see the complete portfolio
of stocks here >>

Thumbs up - indicates he would buy the stock or, at the very least, not sell the stock.  We do our best to interpret Jim's opinion on stocks, as we think it is indicated by his comments during the show.  Please read his comments to decide for yourself.

Thumbs down - indicates he has said not to buy or to sell the stock, based on his comments  We do our best to interpret Jim's opinion on stocks, as we think it is indicated by his comments during the show.  Please read his comments to decide for yourself.

Back up the truck - indicated by Jim, when he says the stock is so good, that he would do a 'mon-back' on the stock... In other words, this is the sound someone would say to a truck driver, "Come on back... " as he is "backing up the truck" to load up on his cargo.  Translation for buying stocks:  This recommendation by Jim indicates that, after you do your own homework on the stock, you should feel comfortable loading up on it, as it is in a good position to be bought at this point.

Stumped. - Of the 2,000+ stocks that Jim Cramer has in his head, for which he has an informed opinion, he sometimes comes across a caller with a stock he does not know well enough to opine on...  He then indicates he is stumped and will have to come back to it, after he does some homework of his own on the stock.  This usually occurs during the Lightning Round, when Jim does not know in advance who is calling, or what their stock question is about.
 

 
Definitions of key phrases used by Jim, known as "Cramerisms":

Definition:   'Pull the trigger' is Jim's phrase for making the decision at that point to trade - either to 'buy' or to 'sell' (although he usually uses the phrase for buying), as if to say you should feel comfortable enough to make the final decision without looking back...

Definition:   'Ring the Register' is Jim's phrase for selling a stock, and making it a final sale, that you should not look back on.  Put it behind you.

Definition:  'Let It Come In' indicates how you may wait for it to pull back, or have the stock price come down briefly, as your chance (after letting it come in) to buy the rest of your position (i.e., total number of shares you own in that stock).

Definition:  'backing it up' or 'doing a 'mon-back' is Jim's phrase for the metaphor of backing up a truck to load up on a stock by buying it.  'Mon-back is short for the imaginary worker saying, 'Come on back...' as the truck is backing up to receive its load... Notice that we use the little truck icon to indicate where Jim has mentioned this.  Translation for buying stocks:  This recommendation by Jim indicates that, after you do your own homework on the stock, you should feel comfortable loading up on it, as it is in a good position to be bought at this point.
  See more "Cramerisms" & other financial phrases here >>
   
Helpful Websites:
  See the stocks currently known to be in Jim Cramer's
Charitable Trust at:

jim-cramer-charitable-trust-stocks.com

 
See the stocks currently known to be in Warren Buffett's portfolio
of stocks at:

warren-buffett-portfolio.com

 
  Stock Homework 101:   This is an excellent upcoming site that provides resources and links to help you do that homework that Jim Cramer recommends after hearing his suggestions...

StockHomework101.com

This site is coming soon.   Thank you.

 
  FastMoneyRecap:   This site will be a quick summary of recommendations made by the great Fast Money TV show crew, that will offer you a unique service, to compare their picks to Jim Cramer's past comments about those stocks.

Fast Money Recap - Trades for next day...

Compare these picks to Jim's comments for the same stocks.

 

 

   
   
  © 2005-2007 MadMoneyRecap.com ■ Important disclaimer: This site is not affiliated with Mr. James Cramer, and is not associated with any television networks or broadcasts. Please note that all thumbs up or thumbs down indicators are not always clearly indicated on the show and are interpreted by us as accurately as possible. Some comments have been edited for brevity and clarity, and extraneous material omitted.  Please rely on watching the show yourself, doing your own homework, and reading the text of the comments to draw your own conclusions. Also, data presented on this site should not be used to make investment decisions and accuracy, although attempted, cannot be guaranteed.  Please consult with your own financial advisor for professional advice.
 
 

 

 
       

Feedback   ■   Terms of use   ■   Privacy Policy  ■   Keep this site Free