This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Jim Cramer: Where the Bargains Are

NEW YORK ( Real Money) -- Nothing like buying a company in your industry that allows you to take out a competitor and immediately raise numbers.

Every time this happens -- literally, every time -- a big bump comes from the acquirer, not just the target, and the bump is only day-one of what can turn into a multiquarter move. That's why I think you can actually buy Actavis (ACT) at some point today because of its purchase of Forest Labs (FRX). It's also why I keep saying that the market is undervaluing so many companies -- you just don't see it until other companies take advantage of them.

I come from an era where the acquiring stock almost always goes down or sits there forever as people try to figure out why the deal makes sense. I come from an era that says that when a company buys another company, it is usually out of desperation.

That's why the acquirer has historically gone down. But this deal -- like so many that have occurred in the airline, rental car, media and telecommunications/cable sectors -- is immediately wildly accretive and makes so much sense that you can only ask what took so long.

Must Read: Kass on Tesla

Sure, Comcast (CMCSA) didn't' go up last week with its acquisition of Time Warner Cable (TWC), but the stock had been on a tear and Comcast is issuing a huge amount of stock to get it done. I think the combined company is a huge buy, however.

It's one of the reasons why I was hoping that Men's Wearhouse (MW) and Jos. A Banks (JOSB) could get together to take out capacity and perhaps get some price relief. I didn't' think that buying Eddie Bauer would be the way to accomplish that mission for Banks.

It's also why I think the retail industry in general isn't a great place to be. They are way overstored, just far too many of them, and their reluctance to get together has hurt them mightily. That and the ability of J.C. Penney (JCP) or Sears (SHLD) to hang on makes the overall ownership case very difficult.

When they do consolidate, it is amazing. For years, there were dozens of drugstore chains duking it out, including many private and smaller chains. Now there are only three, and the performance of all of them has been nothing short of fantastic. Walgreen (WAG) wasn't hurt and is now being helped by a gigantic acquisition. CVS Caremark (CVS) cut a big chunk of earnings out of its plans because of tobacco, and it's up five points. Rite Aid (RAD) is taking out $6 with a new distribution agreement with McKesson (MCK).

Consolidation tells you there are bargains. Companies that don't want to do deals simply aren't being creative enough. They should all be sentenced to reading my chapter on consolidation in Get Rich Carefully 10 times over. Maybe then, they would get it!

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

Editor's Note: This article was originally published at 10:15 a.m. EST on Real Money on Feb. 18.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs