Friday, June 19, 2009
(Cont'd from above)...

Jim (cont'd):   


Jim:       Given that we just talked about Pepsi (PEP*), consider these stocks as "Doritos"... They are awesome... you can't get enough of them... but they sure don't keep.

We want to look at all the stocks in the internet video food chain... because this is a huge part of the current tech revolution...

Right now, internet video makes up about a third of all consumer internet traffic. But, by 2013, it's expected to hit 60% and, keep in mind, between now and 2013, internet protocol (i.e., IP) traffic should grow at a 40% annual clip, which means video is getting a much bigger piece of a much larger pie. It's a hot group.

A lot of that growth could come from what's known as "IPTV"... where the video comes over the internet, but you watch it... well... on the TV screen... which is expected to grow at 144% a year, through 2013. Well, that's insane growth and you've got to remember, on Wall Street, we're addicted to growth. This is exactly the kind of thing the big boys want to see... a major trend... and those who don't know the trend, may I suggest you go to MLB.com. It's the best internet TV play there is... except when you watch the Phillies lose to the Blue Jays... Not even lightning-speed internet TV can fix a bad bullpen...

As I see it... here's the problem. Other than Cisco (CSCO*) which, in addition to making all kinds of routers and other equipment necessary for the internet to work, also makes set-top boxes that can bring video from the internet to your TV...

There really aren't real long-term ways to invest in this trend. All of the other companies are little speculative plays that are basically uninvestible...

But!... They can be traded... And I will bless... I will bless you speculating on them. Buy, buy, buy!...

I'm going to give you a bunch of names tonight from all across the internet video food chain. And then you go home and research each one of them. I do this on Fridays so that you have the whole weekend... and then you can make a speculative field bet if you want to, where you buy a basket of stocks... buy, buy, buy... that are emblematic of a trend, like putting your money on "black" when playing roulette, instead of an individual number... so that, that way, if any of them implodes, you've still got others that should be lifted by the rising tech tide and, believe me, I am not using a gambling analogy idly... This is gambling.

But, before I do that, you need to understand how this technology works...

What we're seeing now is no different from what's known as a product cycle from any part in any part of technology, whether it be mobile internet... the 286, 386, 486 Windows... Vista...

When we first got dialup, for instance, most of the companies involved shot up big... and then they went nowhere... and then they just plain old crashed...

When we got the first sophisticated cellphones, the smaller suppliers... RF Micro Devices Inc. (RFMD), at that point, a company that was a predecessor to Skyworks Solutions Inc. (SWKS)... TriQuint Semiconductor, Inc. (TQNT)... all had their day in the sun, and then they took a big dive.

When we first got high-speed data in the 90s, that Broadcom Corp. (BRCM), Marvell Technology (MRVL), Connexant... and they didn't last either... although the former (i.e., BRCM) is now making a comeback.

In each case, these companies were all suppliers and they were at the mercy to whomever they were selling to... Nokia (NOK), Cisco (CSCO*)... at the time, Nortel Networks (NT)... boy, they crashed... Juniper Networks (JNPR)... And, if the host didn't like them, or switched from them, well they just fell off a cliff...

You see, the suppliers are all interchangeable, the same... they're all commodity makers...

But now I'm going to tell you about the next batch of supplier commodity plays, which have this great short life that you could profit from. These are companies that I believe should ride along on the product cycles of others. If you want to analogize, they're like the... remora (to the shark)... it's a symbiotic relationship... but that doesn't mean that the suppliers can't make a lot of money as they ride along on the cycle, and as long as you recognize that they're speculative trades, and you take you're profits when you have them... Hey, J & J makes a ton of money on floss... and Colgate's toothbrush business is pretty good...

So what stocks are in our field bet?...

Let's go through the food chain...

We know Cisco (CSCO*) is at the top... it's for investing. It's why I own if for my charitable trust, ActionAlertsPlus.com...

Below that, what's necessary?... Okay, I think there are some interesting names here...

CIENA Corp. (CIEN)
I think you need optical systems that carry the signals for internet video, and here, I like Ciena for speculation, as it makes optical network equipment, like switches that carry the IP video signal within a network. I'm not alone in liking this. Just today, Stiphel Nicolas initiated coverage on Ciena with a buy. The analyst was on Erin Burnett's show today, talking about ADTRAN Inc. (ADTN). That's a good one too, but I like Ciena more.


Infinera Corp. (INFN)
Then there are the ones that seem more dicey... I'm not telling you to buy these. I'm saying research them yourself. Perhaps buy them all together, because they could make an interesting speculative field bet, even though they're the plovers, not the crocodiles... There's Infinera Corp. (INFN), which makes multiplexors. Okay, nothing to do with the movies... This company has a unique technology that enables their products to combine and separate worst signals, using less space than their competitors. It's a little more proprietary than the average plover or remorah, but still at the mercy of the larger players.

Akamai Technologies Inc. (AKAM)
What else could potentially go into your speculative internet video basket... Alright, one you may have heard of... it's had a good run... Akamai. If this hadn't had a good run, I'd be pushing it... AKAM, which makes frequently-requested video content easier to access. This is more a play on checking out MLB.com, than on watching video on your TV. It's also good for watching March Madness at your office without anyone knowing it.

Cavium Networks, Inc. (CAVM)
EZchip Semiconductor Ltd. (EZCH)
NetLogic Microsystems Inc. (NETL)
Then there's an interesting area that could have more upside than some of those other names. It's called... and again, and remember, I'm telling you to examine this... I am not comfortable with this group, but they're asked about every night on Lightning Round... It's something called "deep packet inspection" and it allows networks to fill their data packets in order to prioritize the order in which they get sent. Basically this is about putting brains inside of routers, so they can actually read the data... not just its source and destination... and make sure they get there in the right sequence, which allows you to quickly get quality video, if you're watching TV on the internet.

Maybe you've checked this out, and seen it on Google, which we know is huge... This deep packet inspection technology makes getting video to your screen a much more efficient process. Anyone who watches TV on their computer knows... sometimes it halts, freezes... this is all to try to stop that.

I've got three companies that make the processors that go into a Cisco (CSCO*) or Juniper Networks (JNPR) router, and allow them to do deep packet inspection...

Cavium Networks, Inc. (CAVM), EZchip Semiconductor Ltd. (EZCH), and NetLogic Microsystems Inc. (NETL)...

Now these are the most speculative stocks that I'm ever going to talk about on Mad Money. They're very dependent on Cisco and Juniper, and they have been red hot... particularly NetLogic... which is a frequently-asked-for stock on the Lightning Round.

All three have carved out their little own niche and, if you like what you see when you do your homework, then I would cotenant speculating on them as internet video plays. But make sure you use limit orders. Otherwise, you won't money in any of these stocks.

Everytime they get hammered, I would scoop them up, because this cycle's a long one...

Here's the bottom line...

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*Note:  Bank of America is a key holding in Jim Cramer's Charitable Trust Portfolio, which you can see here>. 

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