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Cramer: This company a mountain of hidden value

(Click for video linked to a searchable transcript of this Mad Money segment)

Although you may search the market far and wide for value, sometimes the best plays are right under your nose.

Go ahead, inhale; because Jim Cramer thinks many of the aromatic and delicious foods made by Kraft make its stock an enormous value.

As Cramer has outlined in the past, he believes that M&A is about to sweep across the supermarket stocks, in part, due to a string of recent activity.

Last month, in the space of only a few days, Hillshire Brands bid for Pinnacle Foods. Then, Hillshire itself attracted two bids, one from Pilgrim's Pride and the other from Tyson.

The rapid succession says to Cramer that, "In a slow growth world, it is tremendously difficult for these companies to raise prices. Therefore, they have no choice but to buy other companies in order to drive earnings."

In other words, Cramer thinks there is a blossoming urge to merge in the food space. And Cramer thinks few companies are better positioned to benefit from the new environment than Kraft.

Aydinmutlu | iStock / 360 | Getty Images

Of course, Cramer understands that you may find his outlook surprising.

"Nobody in their right mind would think of Kraft, with its $35 billion market cap, as a takeover target. So why the heck am I recommending it as a way to play the consolidation within the supermarket aisles?"

Cramer said it's because Kraft has a history of spinning off brands and segments to unlock value.

"In 2007, Kraft was spun out of Altria becoming an independent publicly traded company. Later that year, Kraft sold its cereal business to Ralcorp for $2.6 billion. In 2010, Kraft sold its North American frozen pizza business to Nestle for $3.7 billion. Then, in 2011 the old Kraft spun-off its North American grocery business as a new company, the current Kraft Foods Group, KRFT, while the remaining international snacks business was renamed Mondelez."

Considering the culture, Cramer thinks it's not far-fetched to think Kraft will spin-off more brands and unlock more value.

Looking at the many possibilities, Cramer said Kraft could sell its salad dressing division to Pinnacle Foods, which he thinks will remain an independent company as the takeover bids for Hillshire compel the company to drop its own bid for Pinnacle.

Or Cramer said Kraft could sell its coffee brands, which include Maxwell House. He thinks Smucker's would find the opportunity very attractive, especially after Mondelez said that it's merging its own coffee unit with DE Master Blenders.

Cramer said Kraft could even sell its Oscar Meyer brand. "I think the loser of the Hillshire bidding war, whether it be Tyson or Pilgrim's Pride, would love Oscar Meyer," Cramer said.

In fact, Cramer can think of strategic buyers for most every unit or brand.

"I can see the company potentially spinning off everything but its dairy business. If they're aggressive, Kraft's parts could be worth 60 percent more than the whole company's current value," Cramer said.

In fact Cramer's crunched the numbers and he says, "I can see a valuation in excess of $70 billion, or $96 per share, if they do it just right. That's an enormous amount of value Kraft could create simply through some judicious spin-offs and asset sales."

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But even if Kraft isn't as aggressive as Cramer might like, he still thinks at $60, shares present significant value. "At a time when major food players are fighting over Hillshire, I think Kraft is sitting on a mountain of hidden value," Cramer said. Any attempt to unlock some of the value should drive shares higher.

And even if Cramer is off the mark, he doesn't think the bet comes with significant downside. "Even if they do nothing, Kraft is still a slow-growth company that generates a bountiful yield of 3.6 percent."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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KRFT
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HSH
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PF
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PPC
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TSN
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MO
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RAH
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NESN
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MDLZ
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