If you want to know much a company is truly worth, just find out how much its rivals are willing to pay for it, Jim Cramer told his Mad Money viewers Monday. The recent wave of mergers and acquisitions tells us that it's not only a company's earnings that matter.
How important are mergers to the market? Today's news that toymaker Hasbro (HAS) might be in talks with rival Mattel (MAT) sent shares of Mattel soaring over 20%, but it also lifted shares of the acquirer, Hasbro, (up 5.8%) as investors applauded the synergies that could be created.
Cramer also called out Tyson Foods' (TSN) purchase of Hillshire Brands three years ago as another example of mergers done right. At the time, even Cramer was skeptical of the $7.7 billion price tag, but Tyson's management proved him wrong.
Finally, Cramer called out today's bid for Buffalo Wild Wings (BWLD) at more than $150 a share as another terrific deal for shareholders. Shares of the company popped 27% by the close.
That's not to say that all acquisitions are good ones, Cramer noted. The embattled General Electric (GE) has proven to have a knack for ill-timed acquisitions and divestitures that have wrecked a great American brand. Cramer said he wouldn't sell shares down 40% for the year, as he has hopes that management can turn things around, but he wouldn't be a buyer until we start seeing some results.
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Executive Decision: International Flavors & Fragrances
For his "Executive Decision" segment, Cramer again welcomed Andreas Fibig, chairman and CEO of International Flavors & Fragrances (IFF) , a company Cramer billed a "stealth technology" play and one that just delivered a five-cents-a-share earnings beat on a 12% rise in revenues.
Fibig explained that consumer tastes are constantly changing, which is why every year IFF conducts 500,000 consumer interviews to find out what the latest trends and and tastes are likely to be. He said the market is also a lot more segmented than it used to be, which is why IFF has 34 creative centers around the globe to hone in on local tastes and trends.
When asked about the younger demographic, Fibig said that millennials are looking for "clean labels" that contain a lot of natural ingredients and not a lot of artificial ones. That's why much of what his company does is focus on only natural ingredients. Sometimes that's not easy to do, he quipped, as it takes one metric ton of roses, for instance, to produce just one kilogram of rose extract.
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The Buck Doesn't Stop Here
Our economy is humming along and unemployment is hitting new lows. So why are the dollar stores hitting new 52-week highs? Cramer took a closer look at the two leaders in the group, Dollar Tree (DLTR) and Dollar General (DG) to find out.
The dollar stores were all the rage after the recession, Cramer explained, but by mid-2016, it seemed like the rally had come to an end as both companies reported slowing same-store sales and cited "increased competition" from fellow discounters.
But since their summers lows this year, shares of Dollar Tree are up 40%, with Dollar General rising 27%. Why? Cramer said the worst may now be behind these retailers, as initiatives to retain customers appear to be working and same-store sales, the key metric for any retailer, are improving.
Shares of Dollar Tree are a bargain at 18 times earnings, with Dollar General faring ever better at 17 times earnings. Even the easy comparisons from last year, Cramer said both companies are buys, especially given their pull backs today.
Executive Decision: DCT Industrial Trust
In his second "Executive Decision" segment, Cramer sat down with Phil Hawkins, president and CEO of DCT Industrial Trust (DCT) , the REIT with shares that are up 28% since Cramer last checked in 11 months ago and which currently yield 2.4%.
Hawkins said that his company just had another great quarter and is seeing 98% occupancy as the need for more ecommerce distribution centers continues. In today's world, customers want their items now, he said, which makes owning warehouses a different business than it was 10 years ago.
Hawkins explained that in the past, they would buy a field along an interstate to build a new distribution center, but today, they need to be located where the people are, close to population centers, and that means repurposing existing sites and doing whatever it takes to solve problems.
When asked about the rise of automation, Hawkins said that while automation is important for productivity, there's still a shortage of qualified labor to get the job done given the growth the industry is seeing.
Cramer said investors looking for a way to play ecommerce other than Amazon.com (AMZN) need to consider DCT.
In his "No-Huddle Offense" segment, Cramer said that after listening to the conference calls from Macy's (M) and JC Penney (JCP) , he's nostalgic for the good old days of retail, when these companies would be giddy about the upcoming holiday season and when their shares traded multiple times higher than today.
Both companies are faring better than they were before, Cramer noted, with stronger inventory controls and, in the case of Macy's, a stronger balance sheet. But after listening to management, Cramer was left wondering, "is this all there is?"
Are these chains merely relics of a bygone era? Cramer said if you were to start a retailer today, you wouldn't put giant stores in malls, so perhaps they are.
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