Editor's Note: This article was originally published on Real Money on Feb. 14. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.
It's the year of the deal. People just don't recognize it. Stocks have done nothing for years. The good ones have done nothing. The bad ones have done nothing. A handful of stocks stole the spotlight, and the rest have been dogs.
That's most certainly the rationale behind the Berkshire-Hathaway (BRK.A) deal to buy Heinz (HNZ). Five years ago -- five long hard years ago -- Heinz stock was at $52. Until very recently, no doubt until talks started to occur, it stood at $55. Yet the only thing that had happened to Heinz was that it had gotten better, stronger and more powerful. Gross profit, $3.5 billion back then, was on pace to reach $4.3 billion this year. $2.60 per-share earnings then, now $3.53.Can you imagine that much more gross profit, and that kind of EPS increase, yet the stock rallied just 3 points in five years?
It is absurd. It was only after the recent market run and the talk of so many takeovers out there that good things started happening to the stock.I have always loved and pushed Heinz stock on everyone and anyone. It was the first stock I ever bought for my hedge fund. It was the first stock I ever sold as a broker at Goldman Sachs. I did it because my former partner, Jack Shepherd, made this point: No matter what you do, no matter where you are and no matter what happens, you will not see a bottle of Japanese or Chinese ketchup on the table. It will always be Heinz. I guess Warren Buffett knows that, too. Today's second deal comes under the total-outrage have-to-buy category -- the U.S Airways (LCC)-AMR combination. This one really rankles, because all of the planes we fly are always full. The prices are almost never cheap. Now they are going to go up big, and the U.S. Justice Department can't do a thing because it doesn't want an AMR to liquidate. The combination is so powerful, and the airlines now so few, and the barriers to entry so great that it makes a tremendous amount of sense to buy the combination. The Southwest Air (LUV) and United Continental (UAL) area, as well -- all are buys.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV