Four Takeaways From Abbott's KOS Buy

It happened again. You got your best buying opportunity in KOS Pharma (KOSP - commentary - Cramer's Take) on the news that it had options backdating problems. After that it was nothing but straight up, and then the biggest gift of all, the buy from Abbott Labs (ABT - commentary - Cramer's Take).

Abbott obviously could care less about the options backdating thing, and that's because the market, the acquirers -- check out Hewlett-Packard's (HPQ - commentary - Cramer's Take) bid for Mercury Interactive (MERQ - commentary - Cramer's Take) not long after its options problems -- perceive this whole issue as a compensation one, not an accounting scandal. When you add in the classic tell, that there's no reason to backdate unless you know the future is better than the past, you can see why the market likes these companies.

Abbott wants the next big thing, which is raising good cholesterol and blocking bad, hence the KOS Pharma buy. It seems that Abbott's really building up a nice stable of properties of late. Once again, price didn't seem to matter, as KOS was trading at 29 times earnings.

Bottom lines:

1. The market's not valuing pharma right, because this is still one more company that was perceived as expensive but that is cheap to dinosaur pharmas.
2. Options backdating is not an accounting scandal for the company.
3. The multiples for the whole market, which have fallen relentlessly for years now, don't make sense.
4. You raise good cholesterol and lower bad, you have the holy grail.

Random musings: OSI Restaurant Partners (OSI - commentary - Cramer's Take), which owns Outback Steakhouse, is the latest restaurant company to make a judgment that things are too cheap in restaurant land. ... If you love following stocks as much as I do and want to help me help people make money, you're someone I need. I'm looking for an experienced research assistant based in the New York metro area to help me out. (CFAs welcome.) Please send your resumé and cover letter to [e-mail].

At the time of publication, Cramer was long Hewlett-Packard.

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