Cramer Hunts For Safe Harbor in a Storm: Genentech (DNA, GILD)

March 10, 2008 by Douglas A. McIntyre

On tonight’s Mad Money on CNBC, Jim Cramer said he’s officially going "cautious" and noted that you can’t just start recommending stocks in the current market.  He noted that we haven’t even seen a run on the bank, and that was on the way.  As one defensive play Cramer did note that shares of Genentech (NYSE: DNA) might at least offer some safety as biotechs have often been holding up.  His catalyst was the upcoming analyst meeting this week where he thinks the estimates will climb up.  Cramer also noted that Gilead Sciences, Inc. (NASDAQ: GILD) has been one of the better performers, but noted Genentech being cheaper and having more upside.

As Genentech has been getting more expanded uses, that may be the case.  He’s tried getting behind this one before, as have many.  More than a year ago, Cramer called for Genentech to have a base case of $104.00 and an upside case of $140.00.  That was back at expectations for much higher P/E ratios in drug stocks and biotech stocks.  Back then shares were north of $85.00.  At the first part of 2008 shares were in the high-$60s, and now they sit just under $80.00.

The good news here is that the stock has finally worked itself out of that major downtrend that it saw twice rather than once.  That doesn’t mean it won’t go back down, but at least the sellers aren’t just leaning on it because it’s weak and they can take advantage of it.  The bad news is that the call is on the heels of what looks to be overbought territory that might still need to settle down a bit.  Rodman & Renshaw just raised this one last month.

Jon C. Ogg
March 10, 2008