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A Sweetheart Deal
There's money to be made with addition by subtraction, said Jim Cramer Tuesday on his "Mad Money" TV show.
Beverage and confectionery company,
, announced Monday that it would sell its European beverage business, and analysts applauded, said Cramer.
He believes that Cadbury can take a hint and will sell its American beverage business, which includes Dr. Pepper, 7 Up, and Schweppes.
Cramer said candy is growing faster than soft drinks, and Cadbury's P/E multiple is being held down because of the beverage business. Cadbury trades at about 16 times earnings, said Cramer, while pure-play candy companies such as
William Wrigley Jr.
( WWY) sell at 23 and 28 times, respectively.
Cadbury's multiple is sure to expand, if it sells off its American beverage business, he said.
Management has been coy about its plans, though, said Cramer. So, if it becomes apparent Cadbury isn't going to sell, the investment thesis is void, and you should get out the stock.
In response to a question about whether one should buy Hershey, Cramer said the time he preferred to buy Hershey is going into Halloween. That trade worked 18 out of the 19 times he tried it at his hedge fund, he said.
In response to a question about whether
might be a logical buyer for Cadbury's beverage business, Cramer said he doesn't believe the Department of Justice would approve such a deal because of antitrust concerns. Cramer believes that private equity investors would end up buying it.
Up Coldwater Creek With a Paddle
Women's clothing retailer
reported a good quarter Tuesday evening, said Cramer, but the stock initially traded down.
Cramer wouldn't be surprised to see an analyst downgrade the stock Wednesday saying the quarter just wasn't good enough. Nonsense, said Cramer, and
that happens, be ready to pounce.
Coldwater Creek is a regional to national expansion story, said Cramer. The company has transitioned from being a purely direct retailer with catalog and Internet operations to both a direct retailer and a brick-and-mortar retailer.
Coldwater Creek became public in 1997, and by 2002, the company had just 29 stores. At the time, 75% of sales were direct.
Today the company has 174 stores with plans for 239 stores by Thanksgiving 2006. Ultimately, the company believes that there is room for 400 to 500 stores, Cramer said.
Thus, Coldwater Creek is far from reaching the saturation point and has one of the most aggressive growth strategies right now. "Rapid growth. You know that's what we want," said Cramer.
Additionally, Coldwater Creek has marketing deals with
fashion magazine," and Oprah, said Cramer, which is huge.
Commenting in general on his favorite women's apparel retailers, Cramer said his pecking order is Coldwater Creek,
In response to a question about
, Cramer said J. Jill was a "deal stock" -- and the deal is done. Sell the stock.
Cast Off Calpine, Charter
"Don't you go throwing your money away on
CHTR," two companies that trade for little more than a dollar and are "drowning in debt," said Cramer.
fell over 20% Tuesday because it "violated the terms of a debt indenture," said Cramer, and the "bond holders rightly called them on it."
Calpine has about $17 billion in debt and less than $1 billion in market cap, he said. Cramer believes that Calpine is destined for bankruptcy, which means "bond holders now own this company in all but name," and you will likely lose everything if you buy the stock.
The stock is "untouchable...I don't see how it can meet all its financial obligations in the coming year," he said.
Charter communications is another candidate for bankruptcy, said Cramer. The company has about $19 billion in debt and a market cap of under $500 million, he said. Charter has been selling assets to try to pay off its debt, but, no matter how cheap the stock goes, it will remain a bankruptcy candidate, he said.
If you want to play small-dollar stocks, Cramer recommended
. Both are good companies in good sectors, and most importantly, they're "not on the road to bankruptcy," said Cramer.
Hot Fun in Pacific Sunwear
Pacific Sunwear of California
CEO Seth Johnson joined Cramer by telephone. Cramer asked Johnson why he is buying back stock instead of using the money to build more stores.
Johnson said his company had the cash flow to do both. Pacific Sunwear has about 1,084 stores, he said, and he believes that the current concept can grow to 1,400 stores.
Johnson said PSUN has a new footwear and accessory concept called One Thousand Steps, of which it will open the first nine stores next year.
Cramer asked Johnson where Pacific Sunwear fits in vs.
Abercrombie & Fitch
Johnson said that whereas retailers like Abercrombie sell only their own brands, PSUN sells both its own brands and other brands. Pacific Sunwear also has "a big shoe business" and "a much bigger accessory business than a lot of the people we compete with."
Cramer asked Johnson about weakness in its d.e.m.o. retail chain.
Johnson said d.e.m.o. had a "couple tough months on the comp store line. But, it's been nicely positive in the last couple of months." He feels that d.e.m.o. will have a strong fourth quarter and a good 2006.
"I'm very pleased with the improvement in the last few months," the CEO said.
Cramer summed up the interview by saying that he's bullish on retail, and "Mr. Johnson is a good operator."
"Let's give it one thumb up. Oh, take it way up!"
(To view Cramer's interview with Johnson, click here.)
Cramer was bullish on
Sirius Satellite Radio
Barnes & Noble
Cramer was bearish on
Krispy Kreme Doughnuts
RF Micro Devices
China Medical Technologies
( GTW) and
For more of Cramer's insights during the Lightning Round, click here
At the time of publication, Cramer was long Cendant, Altria, Commerce Bancorp and Wells Fargo.
Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on Mad Money are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."
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