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Why FMC's a Buy

Wednesday, 13 Feb 2008 | 6:51 PM ET

Cramer’s always on the lookout for bull markets, and there seems to be a silent one raging in soda ash, he said. No, it doesn’t sound exciting. But Warren Buffett made billions off boring stocks.

FMC Corp: From Ash to Cash
FMC's soda ash business should be worth 2.3 billion dollars regardless of what the market does to the stock, according to Mad Money's Jim Cramer. He thinks the stock will eventually go to $70.

FMC’s deep in the soda-ash business. (Soda ash is used to make glass, bricks, develop film, clean swimming pools.) And the company makes pesticides and herbicides, placing it in the middle of the resurgence in agriculture. Cramer likes it especially because, in this uncertain market, he can put a definite number on FMC’s value as a company.

That’s because rival Tata Chemicals took over General Chemicals late last month, paying $486 per ton for the soda-ash production. Once Cramer knew the going rate, he figured out FMC’s soda-ash business was worth $2.3 billion.

The flipside here is that the rest of FMC is worth only $2 billion, meaning the non-soda ash businesses trade at only five times the enterprise value over earnings before interest, tax, depreciation and amortization. A key chemicals analyst has said it should be nine. That would put FMC’s share price at $70, 30% more than its current price of $53.

The company isn’t perfect, Cramer said, and it won’t surge straight to $70. But he’s confident FMC either gets to there eventually on the strength of soda ash and bullish agriculture or it gets taken over for a premium at the same level.

Questions for Cramer? madmoney@cnbc.com

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

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