M&A Driving Markets Up – Cramer's Mad Money (11/13/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday, November 13.

Cramer reiterated the fact that a company’s true worth is not just about earnings, but how much is it worth to other CEOs. “When one company buys another, it can create so much value that you want to slap yourself in the face, wondering why the heck they didn’t merge years ago. Then there’s the pin action: whenever you get a deal, it tends to boost the value of all stocks in the same sector, which in turn drives up the entire market,” said Cramer.

Hasbro (NASDAQ:HAS) looking to acquire competitor Mattel (NASDAQ:MAT) sent the shares of both companies up. Analysts think that the deal will have massive synergies and could pass regulatory hurdles easily. Since Mattel has declined after Toys R Us’s bankruptcy, Hasbro has a clear advantage.

Broadcom’s (NASDAQ:AVGO) attempt to buy Qualcomm (NASDAQ:QCOM) was also seen as a positive by the market as it could end Qualcomm’s legal disputes with Apple (NASDAQ:AAPL). Despite the deal getting rejected, Cramer still thinks it’s worth holding shares of Qualcomm as the deal’s safety net can be put to use in case the dispute with Apple doesn’t have a good end.

More so, Cramer had thought that Tyson Foods’ (NYSE:TSN) $7.7B acquisition of Hillshire Brands three years ago was overpriced only to be proved wrong later. Another M&A seen in the right direction is Roark Capital making an offer for Buffalo Wild Wings (NASDAQ:BWLD).

Cramer pointed out that not all acquisitions are good ones and once-iconic company General Electric (NYSE:GE) is a classic example of that as its stock is down 40% for the year. GE has unveiled a new plan to turn around the company. CEO John Flannery plans to raise money by selling parts of the company and to bring new faces to the board of directors. “Is GE the stock a buy down here? That’s a rough one. Flannery said today that next year is a ‘massive heavy lift.’ I don’t know, I don’t like to lift massively,” said Cramer. He added that if Flannery is successful with his plans, then the stock will be too cheap to ignore. As of now, Cramer advised holding the stock and not buying more.

“I often talk about how important management is to the value of a company. But if you want to know the damage bad management can do to an enterprise, just look at GE, the only industrial of this whole era that’s actually gone backwards during a renaissance of American manufacturing,” concluded Cramer.

CEO interview – International Flavors & Fragrances (NYSE:IFF)

IFF had a good quarter of revenue growth and an earnings beat. Cramer called it a stealth technology play and interviewed CEO Andreas Fibig to find out what lies ahead.

Fibig mentioned that consumer tastes evolve continuously and hence they conduct 500,000 consumer surveys to find out trends and tastes. When asked what the company’s secret sauce is, he revealed, “There are two secrets, I would say. One is differentiation through technology.”

Their recent acquisition of PowderPure is an example as the company has developed a way to make fresh and natural ingredients into powder for flavoring or coloring foods. Millennials are looking for clean labels with fresh and natural ingredients. “And the second thing is, what we have discovered over the last couple of years is that many of our smaller customers are actually much more dynamic in the market than the bigger ones,” he added.

The company also has 34 creative centers around the globe to get a sense of local tastes and preferences.

Dollar Stores

As the economy has improved, the dollar stores have got their mojo back. “In the last few months, both Dollar Tree (NASDAQ:DLTR) and Dollar General’s (NYSE:DG) stocks have come roaring back. Dollar Tree’s stock’s up more than 40% from its summer lows. Dollar General’s gaining nearly 27%. Not too shabby. Those are stunning moves, but they beg the question, how did the dollar stores get their groove back in a stronger economy?” said Cramer.

Both these companies were at their lows in 2016 as they reported sub-par earnings and blamed the weather, food stamp cutbacks and growing competition. “In short, things were not looking good. However, it’s important to point out that during this period of serial disappointments, both chains were indeed working hard to turn things around,” said Cramer.

Dollar Tree remodeled their stores and broadened their product lines by entering health and beauty and closing under-performing product lines. Dollar General joined the store remodel bandwagon and started selling fresh produce as well. As the economy improved, both these companies started seeing better same-store sales and earnings.

Though some portion of the improvement is due to consumer spending, the companies should get credit for turning things around. Both Dollar Tree and Dollar General are trading at attractive levels of 18 and 17 times earnings and will be good buys on pullbacks.

CEO interview – DCT Industrial Trust (NYSE:DCT)

DCT Industrial Trust is a REIT dealing in e-commerce distribution centers and its stock is up 28% in the last 12 months with current yield of 2.4%. Cramer interviewed CEO Phil Hawkins to hear about the challenges faced by REITs in the current environment.

Hawkins said that they had a good quarter with 98% occupancy rates as the need for e-commerce distribution centers rises. He said that zoning is a major challenge for the company as people don’t want distribution centers nearby because of noise. So they often choose abandoned or under-utilized malls or areas with environmental issues to revamp.

Today, the distribution centers need to be located where the people are and the warehouse business is different than it was 10 years ago. Automation is another challenge for them. “Automation is, perhaps, a key to productivity. The challenge our customers have is more about people than real estate – Truck drivers and people in the warehouses. While there may be a lot of automation, they need a lot of people to get those parcels out to the consumer. Staffing right now is a big challenge. Finding those people is the biggest challenge all of us have, even our company,” added Hawkins.

Viewer calls taken by Cramer

DowDuPont (NYSE:DWDP): Don’t sell it. Cramer is bullish on their M&A strategy.

Arconic (NYSE:ARNC): The stock is breaking down but Cramer thinks it’s worth more. His trust is holding the stock.

JD.com (NASDAQ:JD): They reported good numbers but Cramer is recommending Alibaba (NYSE:BABA).


Jim Cramer’s Action Alerts PLUS: Check out Cramer’s multi-million dollar charitable trust portfolio and uncover the stocks he thinks could be HUGE winners. Start your FREE 14-day trial now!

Get Cramer’s Picks by email – it’s free and takes only a few seconds to sign up.


Filed in: Stock Picks Tags: 

You might like:

Illinois Tool Works Is Doing Better Than The Stock Indicates – Cramer's Lightning Round (7/17/18) Illinois Tool Works Is Doing Better Than The Stock Indicates – Cramer's Lightning Round (7/17/18)
Stay Away From Natural Gas Stocks – Cramer's Lightning Round (7/16/18) Stay Away From Natural Gas Stocks – Cramer's Lightning Round (7/16/18)
Sell-Offs Are Creating Buying Opportunities – Cramer's Mad Money (7/16/18) Sell-Offs Are Creating Buying Opportunities – Cramer's Mad Money (7/16/18)
China Blinked – Cramer's Mad Money (7/12/18) China Blinked – Cramer's Mad Money (7/12/18)
Cigna Is Undervalued – Cramer's Lightning Round (7/12/18) Cigna Is Undervalued – Cramer's Lightning Round (7/12/18)
Which Stocks Are Immune To Trade War? – Cramer's Mad Money (7/11/18) Which Stocks Are Immune To Trade War? – Cramer's Mad Money (7/11/18)
Don't Sell Axon Enterprise – Cramer's Lightning Round (7/11/18) Don't Sell Axon Enterprise – Cramer's Lightning Round (7/11/18)
PepsiCo Stumped The Street – Cramer's Mad Money (7/10/18) PepsiCo Stumped The Street – Cramer's Mad Money (7/10/18)

Leave a Reply

Submit Comment
© 2018 Stock Investors News. All rights reserved. XHTML / CSS Valid.