The Canadians are coming! Investors should take note of TD Bank's ( TD) acquisition of Commerce Bancorp ( CBH) because more Canadian buys of U.S. banks are on the way, Jim Cramer told viewers of his "Mad Money" TV show Tuesday. Thanks to a strong Canadian dollar and great stock value, Canadian banks are primed to absorb American regional banks, which lately have been viewed as small institutions with little room for growth. Unlike Chinese or Arab investors with the cash to buy American companies, Canadians are "warm and lovable," meaning the U.S. government will not intervene in Canadian acquisitions of U.S. companies. Furthermore, if big Canadian banks want exposure to the American Northeast, they need to acquire multiple banks. "I see more than just Toronto Dominion getting in the game," Cramer said. Cramer compared Northeast regional banks with Frito-Lay products, saying Canadian banks "can't eat just one." With the Canadian dollar up 12% against the U.S. dollar since last year, Canadian banks can get more for their money by acquiring American banks, Cramer said. Additionally, Canadian banks' stocks are up, even adjusting for the strength of the Canadian dollar. For example, Canadian Imperial is up 31% and Bank of Nova Scotia is up 23%. Some claim that that TD's payment of 2.8 times book value for Commerce was "silly generous." Cramer told viewers that that view was completely wrong, and he expects very high markups in acquisitions of several more banks, including: National City ( NCC), KeyCorp ( KEY), New York Community Bancorp ( NYB), Comerica ( CMA), Hudson City Bank ( HCBK) HCBK, M&T ( MTB), BB&T ( BBT) and Fifth Third Bancorp ( FITB).
Misguided Markdown at CVSThe market held a fire sale on CVS Caremark ( CVS) today. The decline in CVS was negative pin action from disappointing earnings by Walgreen ( WAG). Cramer called the market "dumb" for lumping CVS and Walgreen together, especially when CVS hedged against what hurt Walgreen this quarter. Walgreen's problems are internal to Walgreen and have nothing to do with CVS' performance, Cramer said. Walgreen blamed low earnings on lowered drug reimbursement rates. Coupled with cost problems stemming from high salaries for their workers, the reduced revenues caused the stock's slump. CVS, on the other hand, saw the reduction in reimbursement rates before it happened, buying Care Mark, a company that makes reimbursement payments. In other words, CVS bought a company that benefits from the flood of generic drugs that hurt Walgreen's revenues. In light of CVS' foresight and Walgreen's inability to perceive an obvious development in the drug market, Cramer considered transferring "best of breed" status for pharmacy retail to CVS.
Looking for comScore ScoreCramer is looking for another stock that will perform as well as Aecom Technology ( ACM), which has shown substantial gains since he recommended it on May 15. ComScore ( SCOR) bears a resemblance to Aecom in that its IPO was relatively unnoticed and received little institutional support, Cramer said. ComScore measures raw data on usage, and behavioral and transactional trends on the Web. Cramer compared it with Nielsen and Arbitron ( ARB), companies that measures television and radio consumer behavior.
Perry Ellis CEO Speaks to CramerCramer welcomed Perry Ellis ( PERY) CEO George Feldenkreis to the show. He emphasized the strength of Penguin, an American brand that Perry Ellis has revitalized by placing it in Niemen, Saks and Nordstrom's. Feldenkreis anticipates that in five years Perry Ellis will grow from a $40 million to a $200 million brand. Speaking about Perry Ellis' expansion into Asian markets, Feldenkreis mentioned limited penetration in Vietnam, and licensing agreements specific to Taiwan and Korea. The company is currently hoping to announce licensing agreements for China and India, which would substantially expand Perry Ellis' consumer base.