Cramer's 'Mad Money' Recap: Buybacks and Takeovers
05/07/07 - 07:32 PM EDT
TheStreet.com Staff
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"I have a new method for predicting takeovers: Stocks with the biggest buybacks also have a big chance of being taken over," Jim Cramer told viewers of his "Mad Money" TV show Monday. Four out of the 14 companies that have bought back 17% or more of their shares over the last year have either been taken over or have agreed to be taken over in the last few months, he said. Even though four out of 14 may not sound like much, hitting a takeover target is like winning the lottery. Cramer said he bets the other 10 stocks on this list are great takeover targets, as well.
Companies that buy back their own stock "aggressively" also tend to be the companies that will do anything to bring out their value, including put themselves up for sale, he explained. "Any company buying back 17% or more of its shares doesn't need to be public."
Cramer said he's spending the whole show on this "magic formula" and giving his top three picks out of the list of companies that are buying back stock.
Cigna (CI Quote - Cramer on CI - Stock Picks) is a company buying back a significant amount of its stock, and if Cramer hadn't already dedicated a show to it recently, he would have highlighted it tonight. Another runner-up, he said, is Sonic (SONC Quote - Cramer on SONC - Stock Picks), which Cramer said he would recommend if he weren't worried about consumer spending.
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