Deere Looks Attractive
It's time to buy some
Deere & Company
(DE), Cramer told viewers, as he featured the stock owned by his charitable trust,
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. Cramer said that Deere is not only a cheap stock, but one with a short and long-term catalyst to boot.
John Deere is largest maker of agriculture equipment on earth and despite strong earnings and raised guidance, shares have still traded down 16% on the year and at a 30% discount to the company's historical price earnings multiple. Cramer said he's start a small position at current levels, and buy even more on any pullback.
In the short term, Cramer said he expects Wednesday's crop report from the Department of Agriculture to be a positive for the stock, while in the longer term, he likes the global trend that calls for a 70% increase in food production by 2050 to feed the world's estimated 9.1 billion inhabitants.
Not only will there be a lot more people, said Cramer, but those people will be eating more grains and more meat, which also requires more grains. He said the only way to feed everyone will be with more output per acre of farm land, and that requires more Deere.
Cramer said he also likes the internals of Deere's stock, as the company is taking market share, expanding international sales and has a stock buyback and a 2.3% dividend. Shares of Deere are trading at just 10.2 times earnings, despite a historical average of 14.9 times earnings.
Best of Breed
Now that Fortune Brands has been broken up into three companies, Cramer said that
, Fortune's former liquor unit, is the one to buy.
Cramer explained that the old Fortune Brands, which made everything from golf equipment to kitchen cabinets to premium liquor, never really made much sense under one roof, but now that Beam is a best of breed, stand alone pure-play on liquor, it's the only division that matters.
Unlike all other spirits companies, Cramer said Beam is the only one that's not family-owned or mired with complex voting issues that would prevent a takeover. He said Beam would be an excellent fit for a company like
, which also specializes in quality liquors.
Beam is also a company that works well no matter what the economy, said Cramer, as evidenced by the company's August volumes, which rose by 11.9%, far higher than the industry average of 4.7%.
Cramer said that Beam has a "magic formula" which includes investing in its brands and marketing, while at the same time innovating on new products. Nearly 25% of Beam's growth stems from new products, he noted.
Beam also has pricing power, said Cramer, and the company pays a respectable 1.6% dividend as well. He said that Beam does trade at a premium multiple, but considering all the company has going for it, it deserves that multiple.