Private Label Pick
Cramer said he's even more of a buyer of private label food maker Perrigo (PRGO), after the company's announcement on March 23 that it's acquiring privately held PBM, a private label maker of baby foods and formulas for $808 million.
Cramer said the markets have already flagged Perrigo as a good stock, by sending shares up 12% on the news of the merger. This is on top of the 27% gain shares have seen since Cramer last recommended the stock on Feb. 9.
According to Cramer, Perrigo's fundamentals were strong before the deal, but now the story is even more compelling. He said retailers from the largest of discounters, to the smallest of drug and supermarket chains, are moving more and more to private label items as they discover they can still deliver quality to their customers with far higher margins than the brand names.Perrigo last reported 70 cents a share in earnings, four cents better than expectations, and raised guidance, all before the new deal was announced. With the new unchallenged leader in private-label baby items under their belt, Cramer said Perrigo is an even bigger powerhouse, with plenty of room still to grow.
California CookingClosing out his series of California recovery plays, Cramer turned to the restaurant group under the premise that if more people have jobs and therefore money, they'll go out to eat more. He said that despite one of the worst economies in the nation, restaurant chains are still expanding in the state, meaning they'll be ready for the recovery. Cramer said investors could speculate on Cheesecake Factory (CAKE) or Denny's (DENN), which have 21% and 26% of their locations in California. They could also consider CKE Restaurants (CKR), purveyors of the Carl's Jr chain of restaurants. CKE has 68% of its restaurants in California, and is up 56% since Cramer recommended it on May 22nd of last year. But for even more upside, Cramer said investors need to look at Jack in the Box (JACK), with its 2700 locations, 42% of which are in California. Cramer said that Jack is looking to become a national franchise by 2013 and has much further to run as it grows into its full potential. Finally, in the casual dining space, Cramer gave the nod to California Pizza Kitchen (CPKI), a stock which has done nothing in three years, but could be poised to break out, and BJ's Restaurants (BJRI), an upscale bar and grill chain with 94 locations with the potential to grow to 300 locations in the near future. Cramer said BJ's is at its 52-week high, but he still feels it could make a great investment.
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