Buffett Move Suggests Financials Are No Value

Of all the packaged-goods companies I follow, the most expensive one by far is Wrigley (WWY - commentary - Cramer's Take). More expensive that Coke (KO - commentary - Cramer's Take), more expensive than Pepsi (PEP - commentary - Cramer's Take), more expensive than General Mills (GM - commentary - Cramer's Take) or Kellogg (K - commentary - Cramer's Take).

And Wrigley is the one that Buffett targets? First, I don't mess with Buffett. He is one of the few guys out there who is innocent until proven guilty. He likes brands and he likes easily figure-outable companies. Few are easier to figure out and more branded. (Not overlooking that the bid is a Mars bid, but $80!!! Holy cow!!! A huge multiple to earnings.)

But this one, a company selling at 27 times earnings until this morning, makes a telling case for questioning not Buffett's judgment -- that will NEVER be questioned as long as he lives -- but the so-called valuation case for the financials that I read about endlessly in the press.

Buffett likes solid normalized earnings of easily understood companies. The financials have taken their earnings away from normalized into uncharted waters in part because of the devastation of their traditional method of making money -- lending and then securitizing -- but also because of the massive increases in equity. The dilution is frightening, as is the denial of the ability to make lots of money when things get better.

I find this lack of Buffett buying to be eyebrow-raising, but this potential purchase of Wrigley to me says, "There is no value in a these regionals." Remember that the last banking recession, in 1991, saw a dramatic increase in the number of Wells Fargo (WFC - commentary - Cramer's Take) shares bought by Buffett. Surely there's a financial that has become as attractive as that one ... or at least I thought there was until this morning.

If anything, I have to ask: What does it say for the valuations of the Pepsis? Maybe they have gotten too cheap? That's a bold statement, but maybe a true one.

Random musings: They have been doing a great job over at sister site MainStreet.com, but I need your help. We have a charity site I am hosting that needs charities to give us their auction items. Can you help me find some that would be interested in this great free publicity? It is a rather extraordinary thing. We are offering publicity for the best "out loud" auctions. So many of you are involved in great charities -- could you see if you have some great items in your auctions that are "special"? If you want to judge what "special" is, check out what's up for auction now. ... People pooh-poohed the upside surprise of Coach (COH - commentary - Cramer's Take) on air, but the buyers loved it. ... The New York Times says that the McMahons of the World Wrestling Entertainment (WWE - commentary - Cramer's Take) enriched themselves with the dividend boost this year. Hold it! They gave the boost to everyone but themselves. Painful error.

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

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