Cramers early 2012 stock pick: ALXN

The Mad Money Stock Super Bowl 2012 Winner

Jim Cramer broke down four stocks that he likes for 2012 on his Mad Money show this week.  The winner of the four stocks according to Cramer was ALXN.  Alexion Pharmaceuticals Inc. (ALXN), is a biopharmaceutical company that makes drugs for people with very serious conditions.  I did a bit of checking into this stock after hearing about it on Mad Money.


I did not have time to read the companies SEC filings or look at their quarterly conference calls so my opinion is derived from looking at the basic financial information.  I have certain criteria that I go by that determines whether I will invest in a stock or even pay close attention to it.  ALXN fails to grab my attention right off the bat because it has a P/E ratio of 93 and a forward P/E ratio of about 51.  I'm not paying 51 times earnings for anything ever much less 93 times earnings.  The industry average P/E is 20 and the S&P 500 average is about 24.  That kind of valuation is too risky in my opinion, no matter how good the company is.


The second stat that disqualifies ALXN from me after digging into it further is it had negative income growth.  There are too many companies with positive income growth for me to consider ones that have negative income.  The company gets a 7 out of 10 from MSN stock scouter and a B+ from thestreet.com's stock picker.  These numbers are mediocre, but when paired with the HUGE P/E and the negative income growth I'm going to spend my stock research time else where.


Cramer is obviously no dummy and certainly knows more then me about investing and has his own style.  There are a bunch of positives for ALXN.  These include its massive +34.83% growth estimate for 2012.  That alone makes ALXN attractive.  Analysts also love the stock and most analysts rate it a strong buy or buy.  The company also enjoys a huge profit margin of 88% compared to the industry average of 68%, and the S&P average of 39.5%.


ALXN also shows a strong technical trend on its chart.  The technicals look like ALXN is at the peak of its run right now and just going by the charts traders would have to wait until the stock pulls back to the $66 level or so before entering the trade.

ALXN's Chart from stockcharts.com

I'm sure that Cramer sees more then I can see about ALXN but going off of my own criteria it is not a stock that interests me.  All investors should develop their own trading style and criteria that they feel comfortable with.  Do not make the mistake of investing in a stock just because a television pundit or analyst recommends it, even if they are the greatest of all time i.e. Jim Cramer!!!