NEW YORK (TheStreet) -- TheStreet's Jim Cramer asks what do investors do when they see a gigantic call buyer out of the money in Clorox (CLX - Get Report)? They could cover their shorts on Clorox out of fear of a bid from Unilever (UL), or they could go long Clorox because it has a 3% yield at a time when Spanish bonds are trading at 2.5%.
Cramer calls this the "new world" of paying a double-digit multiple on a 1% grower. He asks if this is a sign of froth and says it makes too much sense for Clorox to break up in a world where Hillshire Brands (HSH) has two different buyers. He adds it makes too much sense for Kraft (KRFT) or Unilever or even Colgate (CL - Get Report) to to buy Clorox. Cramer also notes BMO Capital Markets upgraded Colgate on Tuesday.
Cramer says the consumer packaged goods group is viewed as undervalued in light of Tyson Foods' (TSN) acquisition of Hillshire Brands, and Cramer thinks this view could be correct.
Must Watch: Jim Cramer: Could Clorox be The Next M&A Play?STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings team rates CLOROX CO/DE as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CLOROX CO/DE (CLX) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, increase in stock price during the past year, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.