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3.17.06
Happy St. Paddy's Day
bull
Bullish:

Encore Medical (ENMC) Valero (VLO) Transocean (RIG) Nabors (NBR) Schlumberger (SLB) Dow Chemical (DOW)
Constellation Energy (CEG) Essex (KEYW) Manulife Financial (MFC) Watsco (WSO) Hexcel (HXL) Airgas (ARG)

 bear
Bearish:

Holly (HOC) Parker Drilling (PKD)  Helix Energy Solutions (HELX) Intel (INTC)
CyberSource (CYBS) Homestore (HOMS) CarrAmerica Realty (CRE) NYSE Group (NYX)

view todays stock summaries here

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Opening Discussion:
LTD  (LIMITED BRANDS INC)


The headline today shouldn't be: “L’oreal to buy Body shop.” How can that help you? How can that make you mad money?

How can we try to make some money off this? Here's what's inside Cramer's head - Cramer's headline would read: 'Consolidation in mid to high end cosmetics'...

Buy LTD!

Now, how did I get there?

It's not just that L’oreal is buying a cosmetics chain. It's that they're paying a super premium for body shop, which is a not very good chain for moneymaking.

Bad chain gets bought for lots of money. You've got a sign that there's consolidation brewing in an industry, and consolidation means everything that can potentially get acquired should get more valuable as people speculate on takeovers. And, hey, maybe some takeovers actually happen! (The house of pleasure)...

...and that long and convoluted story is how we get to LTD! Which I like here, because it owns Bath and Bodyworks - kind of like the co. That got the bid.

If we've got more acquisitions coming in this business, I think Bath and Bodyworks, a division of LTD, a pretty good chain, and a pretty large one, could be the next to go!

Now, I think it's worth you're while to speculate on this takeover. I think you should buy LTD and wait it out.

You cannot ever speculate on a potential takeover, unless the co. You're looking at has good, or improving, fundamentals.

So, when we look at LTD, we need to do our homework to make sure it's in good enough shape to buy, as we wait for something to develop with  Bath and Bodyworks, that could be like what the L’oreal bid was like.

And, actually, I think LTD is starting to do really well. And the stock is actually cheap here.

Right now, limited express is one of the hottest stores in the mall. And I think that LTD's clothes have a more formal look. They fit with this increasingly formal trend that the fashionistas have deemed must be happening now. You know, out of sneakers into something a little more dressier.

People better at looking at clothing and retail than Cramer, pointed this out to me. all right, I'm really talking about Dana Cohen. She hosted this great consumer conference at Bank of America, that I had the privilege to speak at, and she took me aside and said, 'Listen Jim. The LTD's got it going.' she's been spot on with this stuff before, so I'm sticking with her judgment which is darn good.
Now, I also think that LTD could spin off 'Express' after they fix it up a little more, and that would make them a hefty bit of money.

I gotta tell you though. It was this  Bath and Bodyworks that I was worried about. And now, I think the body shop bid eliminated my worry about some of these fine products.

LTD has some other good things going for it. It's got Victoria Secret, which it owns. I think that's going to go up against some easy compares (def.: comparison of same store sales one year ago). The numbers weren't so hot last year.

Bottom line!: LTD is cheap. It's got the clothes that people want, and it owns bath and body works, which could get bought for a hefty premium. LTD is for me!

Caller asking about LTD vs. URBN:


“Holy cow, you cut me to the quick. URBN - the 10k is going to come out the 2nd week of April. I think it's just going to have okay numbers, not great. 10k being the quarterly report that we're looking for. I think URBN is still going to be a tad under selling pressure. I know they're both at 24. Which stock would get to 27 first? I still think it's going to be URBN, but it may see 23 or 22 first. I like LTD, because it could develop over time. And, best of all, because nobody likes it, other than my friend Dana. And people don't even realize that it's gotten a better look.”



Closing Discussion:
HSY  (THE HERSHEY COMPANY)


In Monday's business week 'Hershey: a sweeter bid" - they mention that HSY is a takeover target. They got the stock going up $1.35. I wish I had done this stock yesterday.

But then, the stock will probably go down Monday, because the head of the Hershey trust, which owns 78% of the voting shares, came out and denied the story; said it's not for sale. That could be your chance, and I'd do a 'mon-back.

See, if HSY is a takeover target at all, you have to buy the stock. But even if it isn't, you may have to buy the stock.

At almost 54 bucks, it is only about $4 over its 52-week low. Probably one of the worst acting food stocks, except of course for CON AGRA (the house of pain) - holy cow, cutting the dividend!

It is $13 off its high, so I regard HSY as a bit of a steal right now. But if it's not going to get bought, you look at the stock and the fundamentals and they are improving. But you could be sitting in investment purgatory for a while.

So, what's it going to be?

I think you have to buy HSY.

I have to give credit where credit is due - since I've been stealing most of the ideas from everybody else - that Frank Curzio came up with this from TheStreet.com. I give him a big booyah for giving me this one.

You know what happens if this one gets bought? The guys at Bear Stearns - hey, they know. They think that, if it gets bought, it'll go to 70-75. They think Wrigley makes sense as a buyer. Hey, listen, so does Cadbury. I think it'd be a great fit personally.

If you buy a stock at 54, and you catch a 20-point gain because of a takeover, I say you're doing pretty well!

Now, what about if there is no takeover? I don't think you're risking that much. Things at HSY are on the mend. If this stock dips below $50, I'd be shocked.

So, if it's 4 down, and 21 up, that's the kind of risk reward that you don't want to miss - you can't afford to miss it!

Let me tell you why HSY is safe - even smart - for you to own, takeover bids aside.

Right now, you've got very high sugar prices. Mostly because this year's hurricane knocked out a lot of capacity for this year's sugar refining in florida and Louisiana. 90% of sugar refining takes place in those places.
Now, sugar's something like 10% of HSY's cost of goods sold. Any decline in sugar prices should mean an increase in HSY's bottom line. Short run thing.

Sugar production isn't going to decrease from here on out. And any good news on the sugar front should spark a decline in prices that'll help HSY and let its margins expand. How much do we love margin expansion on Wall Street?!

Their biggest cost of goods sold is cocoa and, right now, the co. Is forecasting a decrease in cocoa prices this year. I think they're honest, since they forecast a big increase in 2003.

Now, this guy on this marketwatch 'peak chocolate? Commentary: china's insatiable commodities appetite' he was just saying that Chinese chocolate demand could cause a worldwide cocoa bean shortage, but he claimed that this is a good thing for HSY, just like high oil prices are a good thing for energy companies

I don't know. As I see it, cocoa prices go up - HSY goes up. As cocoa prices go down, HSY goes down. Okay.

They've got new products. They also bought Scharfenberger(?), a co. That makes delicious dark chocolate. And that should also mean more growth for a co. That is kind of showing anemic growth of late.

Now, the last confirmation that this co. Is sound enough to speculate on a takeover is this: it's heartless. It's cruel. It's positively Marley, if not scrooge. They're firing people and buying back stock!

You cannot go wrong, unfortunately, in corporate America, by firing people and buying back lots of stock!

So, the bottom line!: maybe Wrigley's. Maybe Cadbury. Maybe nobody. It doesn't matter. HSY can still make you some money!




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