Mind the GAP

If you own a supermarket chain with horrible inflation problems and a difficult integration issue because of acquisitions, what would you be doing with it now?

If you own part of the Great Atlantic & Pacific Tea Company (GAP - commentary - Cramer's Take) and you are German, you are buying the heck out of it.

That's what it seems to be when you look at the incredible buying by insiders since the company reported one of the worst quarters of any company, at least as regards to expectations, and shed three-eighths of its value instantly.

I have never liked this 446-store chain, nor have I liked the supermarkets in general because of brutal competition and low margins. GAP has lots of remodeling and changing to do, and it is in one of the totally oversupermarketed areas -- the Northeast. It has not done well for years. No matter, if you read the press release from the quarter, these guys think they are doing great! And they are putting their money where their mouths are.

The question is, how much of their money? The company has a $1 billion market cap. The Tenglemann family owns 38%, and their handpicked people are doing the insider buying. In euros, this stock has become a rounding error for them. Could they be thinking of buying the rest before the dollar rallies?

To me, it seems, that the risk-reward between how badly run these stores are and the competition that is so heavy, and the possible upside from a bid, at last favors the positive.

I never recommend crummy companies on the basis of takeovers ... I mean, who wants one? But if you think the company isn't crummy and is doing everything right -- as the press release implies -- why the heck not buy it?

At the time of publication, Cramer had no positions in the stocks mentioned.

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