Mad Money Recap
Cramer's 'Mad Money' Recap: It's Takeover Time
TheStreet.com Staff
12/07/05 - 07:16 PM EST
Click here for an archive of Cramer's "Mad Money" recaps.
The year "2006 will be a huge year for mergers," Jim Cramer told viewers of his "Mad Money" TV show Wednesday, and he is convinced that a likely takeover target is UST (UST - Cramer's Take - Stockpickr). UST, which makes smokeless tobacco, is a stock that no one cares about, said Cramer. Growth is virtually nonexistent for tobacco, but UST's fundamentals are improving, he said. The company's margins are improving, and tobacco's legal problems -- not that much of a risk for smokeless tobacco -- are drying up. UST also has the flexibility to increase its already huge dividend, he said. When a stock gets too hated and the fundamentals are getting better, a takeover "makes a lot of sense," said Cramer. He believes that R.J. Reynolds, a subsidiary of Reynolds American (RAI - Cramer's Take - Stockpickr) would be the likely acquirer and believes that a takeover could come at a 25% to 40% premium. UST closed at $38.29 Wednesday.
In response to a question about Lloyds TSB Group (LYG - Cramer's Take - Stockpickr), Cramer said Lloyds is worst of breed, and the stock is "terrible" even if it does pay a big dividend. Stick with Prudential (PRU - Cramer's Take - Stockpickr) and MetLife (MET - Cramer's Take - Stockpickr), he said.
Listen to the Bard
Medical device company C.R. Bard (BCR - Cramer's Take - Stockpickr) is also likely a takeover target, said Cramer. But, Cramer would be interested Bard even if it weren't a takeover target because it has great fundamentals and it's one of the few medical device companies not to receive a subpoena from the Department of Justice in its investigation of industry sales practices. A takeover, which Cramer believes would happen at about $100 a share, would be the icing on the cake, he said. Bard closed Wednesday's regular session at $67.07. Cramer said that there are too many medical device companies and that the industry is ripe for consolidation. Because of the strong dollar, which attracts foreign investment, and a low tax rate environment for stocks, "anyone who wants to do a merger deal wants to do it before these two very positive conditions evaporate," he said.Don't Like That Bike
MarketWatch's Herb Greenberg joined Cramer to talk about Harley-Davidson (HDI - Cramer's Take - Stockpickr) and Sears Holdings (SHLD - Cramer's Take - Stockpickr). Greenberg said Monday a J.P. Morgan analyst issued a report saying Harley-Davidson has warehouses available "where the dealers actually store all the bikes that they can't handle." The important issues, said Greenberg, are whether Harley transferred ownership of the bikes to the dealers and whether Harley recognized sales of those bikes as revenue. Greenberg said it appears that Harley did transfer ownership and did recognize the revenue. But, another big question is "Why would [the dealers] buy more bikes than they could carry in their own warehouses?" "If you want to make a good quarter you might do that," said Cramer. "Well, if you do that one quarter too many, you know what happens -- especially if you don't...get the orders you want" in the spring? asked Greenberg. "That could be an issue." Greenberg added that he is waiting to hear back from Harley Davidson for an explanation about the warehouses and an answer as to how many of these types of warehouses the company has. Cramer then asked Greenberg about Sears. Greenberg said he has concerns about things that Chairman Eddie Lampert said in his letter to shareholders issued with the company's third-quarter earnings report Tuesday. Greenberg said the letter revealed that "there is no grand strategy." "His grand strategy is to create more cash," countered Cramer. "He's going to create more cash only one way...if he doesn't spend any money working on the stores." "There are 2,300 stores. He's got 1,000 stores too many," said Cramer. "So, he cuts down the [number of] stores, and then what do you have?" asked Greenberg. "You have a very profitable operation," said Cramer. Cramer summed up the interview saying, "Harley, I don't like. Sears? Ignore that man."What a Long, Strange Trip
Cramer wants to back up the truck on trucking stocks because of new rules that will go into effect in 2007 requiring diesel trucks to conform to much more stringent emission standards. The new rules are expected to add between 8% and 16% to the price of a truck, he said. So, truckers considering replacing their trucks have a huge incentive to do so in 2006. Even without an incentive, we would already be entering a "major replacement cycle," said Cramer, as the average age of a truck on the road -- at six years -- is the highest it's been since the early 1990s. Cramer likes Paccar (PCAR - Cramer's Take - Stockpickr) and Volvo (VOLVY - Cramer's Take - Stockpickr). Although Volvo is best of breed and is working on a hybrid-diesel engine for next year, Paccar is also good, he said.Lightning Round
Bullish
Cramer was bullish on IBM (IBM - Cramer's Take - Stockpickr), Newmont Mining (NEM - Cramer's Take - Stockpickr), Goldcorp (GG - Cramer's Take - Stockpickr), Anglo American (AAUK - Cramer's Take - Stockpickr), iRobot (IRBT - Cramer's Take - Stockpickr), T. Rowe Price (TROW - Cramer's Take - Stockpickr) and Nucor (NUE - Cramer's Take - Stockpickr).Bearish
Cramer was bearish on Petroleo Brasileiro (PBR - Cramer's Take - Stockpickr), Eastman Kodak (EK - Cramer's Take - Stockpickr), Connetics (CNCT - Cramer's Take - Stockpickr), Trex (TWP - Cramer's Take - Stockpickr), Chesapeake Energy (CHK - Cramer's Take - Stockpickr), BE Aerospace (BEAV - Cramer's Take - Stockpickr), Orbital Sciences (ORB - Cramer's Take - Stockpickr), MDU Resources (MDU - Cramer's Take - Stockpickr), Valero Energy (VLO - Cramer's Take - Stockpickr), BellSouth (BLS - Cramer's Take - Stockpickr), Verizon (VZ - Cramer's Take - Stockpickr), AT&T (T - Cramer's Take - Stockpickr), Eaton Vance (EV - Cramer's Take - Stockpickr), Montpelier Re Holdings (MRH - Cramer's Take - Stockpickr), Sycamore Networks (SCMR - Cramer's Take - Stockpickr), Avaya (AV - Cramer's Take - Stockpickr), Alcatel (ALA - Cramer's Take - Stockpickr) and Cisco (CSCO - Cramer's Take - Stockpickr). For more of Cramer's insights during the Lightning Round, click here. |
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1. | Pigs Get Slaughtered | |
2. | It's OK to Pay the Taxes |
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3. | Don't Buy All at Once | |
4. | Buy Damaged Stocks |
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5. | Diversify to Control Risk | |
6. | Do Your Homework |
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7. | Don't Panic | |
8. | Buy Best-of-Breed |
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9. | Defend Some Stocks | |
10. | Don't Bet on Bad Stocks |
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11. | Own Fewer Names | |
12. | Cash Is for Winners |
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13. | No Regrets | |
14. | Expect Corrections |
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15. | Know Bonds | |
16. | Don't Subsidize Losers |
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17. | No Room for Hope | |
18. | Be Flexible |
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19. | Quit When Execs Do | |
20. | Patience Is a Virtue |
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21. | Be a TV Critic | |
22. | When to Wait 30 Days |
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23. | Beware the Hype | |
24. | Explain Your Picks |
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25. | Find the Bull Market | |||
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