Jim Cramer's Top Takeaways: Dr Pepper, Monster Beverage, Constellation Brands, BHP Billiton
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Did you miss last night's "Mad Money" on CNBC? If so, here are Jim Cramer's top takeaways for Monday's trading.
Dr Pepper Snapple (DPS) and Monster Beverage (MNST) - Get Report : There's one sector that's in bull market mode: the beverage stocks. Cramer said his favorites in the soda and energy space remains Dr Pepper Snapple and Monster Beverage.
While shares of Coca-Cola (KO) - Get Report and Pepsico (PEP) - Get Report have only seen modest growth in 2015, shares of Dr Pepper and Monster are up 23% and 36% respectively.
Dr Pepper derives 90% of its revenue from the U.S. and is therefore largely immune to the strong U.S. dollar. The company is also very shareholder friendly, buying back $668 million worth of its own shares, or 3% of its float, in just the past quarter. Even with shares near their 52-week highs, Cramer said Dr. Pepper is a buy at just 21 times earnings.
Then there's Monster, the world's number two energy drink maker in a happy duopoly with Red Bull. Thanks to it's partnership with Coke, Monster has access to a huge global distribution network, even though it still derives 80% of sales domestically. Shares of Monster trade at 38 times earnings, but the company sports a 21% long-term growth rate.
Constellation Brands (STZ) - Get Report and Molson Coors (TAP) - Get Report : Continuing with his beverage bull market thesis, Cramer took at look at the alcoholic side of the beverage biz, recommending Constellation Brands and Molson Coors.
Shares of Constellation are already up 39% for the year, and the world's number three brewer and premium wine maker could get even larger if the merger between Anheuser-Busch InBev (BUD) - Get Report and SAPMiller (SBMRY) requires the divestiture of some assets, which it most certainly will. But even without more brands, Cramer said Constellation is already having troubles keeping up with the demand for its products. Shares of Constellation trade at just 23 times 2016 earnings.
Then there's Molson Coors, which is already in a deal with SAPMiller to buy the remaining portions of the Coors brand it doesn't already own. After the deal closes, Molson will own 100% of Coors and Miller Lite, which will boost earnings by 25%, adding $4.7 billion in revenue.
BHP Billiton (BHP) - Get Report , Rio Tinto (RIO) - Get Report and Vale (VALE) - Get Report : Rule number one when you find yourself in a hole, stop digging! That's a lesson that has fallen on deaf ears at BHP Billiton, Rio Tinto and Vale, three companies which Cramer dubbed the "Three Stooges" of iron ore.
It seems like common sense really, when the price of the commodity you make falls, you cut production of that commodity. But the stooges have been doing the opposite, raising production, resulting in the cutting of their share prices by 58% for BHP, 33% for Rio and a whopping 75% for Vale over the past two years.
Cramer said the dividends are all three companies are in danger. BHP yields 4.3% but currently pays out $2 for every $1 in earnings. Unsustainable. Rio yields 6% and pays out $1 for every 40 cents of earnings. Then there's Vale, which has already cut its dividend twice but still yields 5% and is losing money every quarter.
Cramer said investors need to steer clear of this entire sector.
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At the time of publication, Cramer's Action Alerts PLUS had no position in stocks mentioned.