Baby Got Buyback
The market hasn’t found its footing yet. Look at Tuesday’s selloff. Better to stick to a defensive game plan for the time being. The best strategy would be to find companies that are buying back tons of stock.
Then there’s Cramer’s number-one maxim: There’s always a bull market somewhere. So if you Home Gamers can find a stock in a sector where the money is still rolling in regardless of the rest of the market – and one that has a good buyback plan – then you’re in good shape. Of course, Cramer would never leave you hanging, so he has one such stock to share with you tonight: Cigna.
Cramer’s favorite bull market is the non-pharmaceuticals healthcare sector, and Cigna is one of these big, amorphous managed-care/life insurance/retirement products companies. It also spans across two areas he likes: the recession-proof desire all baby boomers have to protect themselves, especially in containing healthcare costs, and Cramer’s own desire to own a financial with no mortgage risk.
This $13.6 billion firm bought back $2.4 billion in stock just from January 2006 through last October. Cigna’s shrinking its share count so aggressively it’s practically taking itself private. And there’s good reason for it. The company is growing slowly but surely at 12%, but the stock sells at a measly 13 times earnings. That’s way too cheap – and Cigna knows it too. So they’ve backed up their own truck, and they’re buying hand over fist.
Cramer doesn’t even think that Cigna should be publicly traded. It doesn’t need capital markets. One day it will be recognized as great, but in the meantime, why should it put up with all the ugliness coming out of the hedge funds, the ETFs and the S&P, which it, unfortunately, belongs to and, thus, trades with?
Bottom Line: Twelve percent growers with 13 multiples and gigantic buybacks that are also great baby-boom plays don’t come along every week. Get with Cigna’s management and start buying.
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