Beer and wing chain Buffalo Wild Wings' stock price has made a dramatic resurgence in the last six weeks, but Jim Cramer's still not hungry for it.
After an epic multi-year rally, Buffalo Wild Wings reported a series of disappointing numbers that caused the stock to plunge to $134 in mid-July from $200 at its peak 12-months ago. But in the past six weeks, shares rose 20 percent from July lows.
Cramer suspected that some of the move is because the company reported a better-than-feared quarter in July, and also because activist Marcato Capital got involved, and purchased 5.1 percent.
But Cramer's still not biting.
"Until we see some evidence of a turnaround, I don't care that there is an activist at the gate, you need to stay on the sidelines with this one," the "Mad Money" host said.
In many cases, activist involvement can benefit investors. Skilled activists can help a company unlock value. However, they can also be an unwelcome distraction for a company that is trying to get back on track.
Cramer noted that Marcato's history in taking big, public activist positions has been inconsistent. The fund first gained notoriety in 2013 after joining a coalition of activists in a stake for Sotheby's. Its largest position is in Bank of New York Mellon, where the performance seemed mixed to Cramer, and the fund sold off 40 percent of its position in the stock earlier this year.
In late July, investors learned that Marcato had been having constructive talks with Buffalo Wild Wings, which included getting the company to move into a more franchise owned business model. Two weeks later at its annual analyst day, the company increased its buyback by $300 million and announced multiple initiatives.
However, Marcato seemed unimpressed, and published a letter calling for the company to make substantial changes to its business practices and called for operational excellence. Buffalo Wild Wings indicated it would consider the proposals.
"I've got to say, aside from brooming the board and killing the new concepts, Marcato's suggestions are a lot more vague than what you normally hear from activists," Cramer said.
So, while Buffalo Wild Wings has been on a hot streak lately since Marcato got involved, Cramer failed to find a reason to believe the company has fixed its core problem — the vicious decline in same-store sales.
Until there is evidence of a comeback, Cramer's staying on the sidelines.
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