Monday, 12/10/07
Posted 12/10/07,  10:35 pm

(Scroll down to see Jim's comments below)

 
 
Today's date:  Monday, 12/10/07

  Dow Jones: 13,727 +101
  NASDAQ:   2,718   +12
  S&P 500:   1,515   +11
 
 
 
 
 
First Segment
 
Opening Segment 1 Title: 'KNOW YOUR IPO'...  'Profit Motive'

.  .  .  .  .

Featured Stock(s): Triple-S Management Corp. (GTS)


See Opening Segment 2, below...

        
On Wall Street, nothing's ever a sure thing...

But some stocks... some genres... some sectors... come pretty darn close.  And I've got a brand new one...  A fresh-faced IPO that came public just on Friday... and I'm giving it to you...

In Peter Lynch's first book... one of our favorites, if you haven't read it... very inspirational and instrumental to my career... this is the fabulous Beating The Street, by Peter Lynch...

Lynch talks about what he calls one of the few sure bets out there... his words, not mine...  which is betting on the conversion of a private savings and loan, into a public bank.

Peter Lynch - one of the greatest investors of all time, with the Magellan Fund -  the reason why, when I lived in my car, I still gave money to him, rather than to home insurance... This guy made me and my family a lot of money, and he was dead right about these conversions...

And here on Mad Money, we have come up with what we believe is another formula that we think comes as close to a sure thing as what Peter Lynch describes in Beating The Street...

When you have a not-for-profit managed healthcare company that has the exclusive right to the Blue Cross, Blue Shield brand in its state, and that non-profit company converts into a for-profit business, and comes public, then you've got a stock that, in my opinion, is as close to a guaranteed-to-make-you-money stock that I could find of all the 6,000 publicly-traded stocks...

We ran the numbers on the performance of stocks that fit this pattern, after their IPOs... and, for the first four years, Blue Cross, Blue Shield non-profits, converting into for-profits... they were up an astounding average of 28% a year... 28% a year!  And usually the first year was better than the others!

Maybe this is when we'll look back... you'll buy it and you'll say, 'that was easy'...

.  .  .  .  .


Every one of these stocks also has something in common.  They ended up being bought by WellPoint Inc. (WLP) for a huge premium!

So far, this formula has worked every single time... but the last time one of these non-profit, Blue Cross, Blue Shield affiliates converted into a for-profit publicly-traded companies was five long years ago.

Most of the states where this hasn't happened yet, have created a lot of obstacles to prevent these organizations from turning into for-profit businesses, because they want to keep their healthcare on the cheap.

So why do we care about this formula?...  What do we have here?...

Because, on Friday, a company called Triple-S Management Corp. (GTS), which was the non-profit Blue Cross, Blue Shield affiliate for Puerto Rico came public, and is now the for-profit Blue Cross, Blue Shield affiliate.

Got it?

In other words, it fits the pattern.  It's the formula all over again.  And I have total confidence that this one - just like the others - should make you a lot of money, and you'll be saying, 'that was easy'...

.  .  .  .  .


We've gotten very lucky here because, so far, GTS looks like a bit of a dud...

It was priced at $14.50 for the IPO.  That was well below its initial range of $16-$18 a share.

It opened only 31 cents higher...

Obviously, everyone's forgotten - five long years - that this formula works...

Now it's trading at $15.87, which is still well below the range.  We love this, because it means the stock is probably going to be ignored... or nobody cares...

Rarely, have I ever felt anything Blue Cross or Blue Shield could be considered a gift, but this is surely one of them.

 

On this show, we recognize the potential of this company, because it fits into a formula that, so far, has produced only winners.

But what makes this formula so great... we know it's been working... but why does it work?

We need to know why it's been working, if we're going to stick this stock on our buy list...

.  .  .  .  .


Here's the playbook for these companies, when they switch from non-profit health insurance providers, to the for-profit kind...  This is what all the others did.  It's what I think GTS is going to do right now... 

These companies all started out with a bunch of unprofitable, or barely profitable, contracts...

That makes sense.  They were non-profits... But it makes no sense whatsoever, once you start trying to make money for shareholders.

So, what you do if you're GTS is raise prices on these unprofitable contracts to make them worth your while.  Either your customers take the new price, or they walk away... Since they were losing you money anyway to begin with, you become just naturally more profitable.  And, if you become more profitable, I believe your stock will go higher.

That simple playbook over the next few years, should allow GTS to grow incredibly, and to really fatten up its margins, it's profitability... buy, buy, buy!

GTS is replicating, I think, one of the single-best stories we have ever seen in the business... but we also have to remember our discipline... and this is important... because I already sense that people are going wreck this trade, and I'm not going to let you...

This is a $450 million market cap stock.  If you try to pay up for this stock, in after-hours, after it was such a dud last week, I'm pretty confident that you're making a mistake... maybe a big mistake... because I believe, a week from now, this stock will have come back in to where it was before I did the segment.  That might be a better entry point...

If you don't use limit orders, you're going to get hurt... so please don't buy it right now...

If you use my one-week rule, I'll bet you do much better than if you buy right now... 

.  .  .  .  .

The Bottom Line!:   There are no sure things with Wall Street, but Triple-S Management Corp. (GTS) comes pretty darn close.  I am beseeching you and imploring you... If you choose to buy this, use limit orders.  Put a $16.50 top... $16.75... $16.25...  I do not want to hear that you bought it on a market order at $18, and therefore you think Jim, how could you hurt me?...



[See Jim's 2nd Opening Segment stock picks below... ]

 

 

 



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


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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)

GTS

15.87

na

Triple-S Management Corp. (GTS)

 

       
         

 


Netflix, Inc.


 
 
Second Segment
 
 
 
Final Segment 2 Title: 'On The Line'....

CEO Interview
Jack Cumming, CEO

.  .  .  .  .

Featured Stock(s): Hologic Inc. (HOLX*)


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)