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When ConAgra decided to sell off its commodities-trading division, Cramer figured the market would react positively. After all, the firm was dumping an incredibly volatile business that seemed to scare off some investors. Surely, a pure-play ConAgra would be widely touted by the Street.
Apparently not. The stock’s stuck at $23, and Cramer can’t figure out why. President and CEO Gary Rodkin put the blame on Wall Street, claiming his company has the right formula – a great brand portfolio (Peter Pan, Chef Boyardee, Swiss Miss and others), cost containment and an innovative pipeline of products – to deliver sustainable growth.
“We are very confident in the algorithm that we’ve put forward,” he said.
The deal to get rid of the commodities-trading business isn’t fully completed yet, Rodkin pointed out, but once that’s done he’s confident ConAgra [CAG
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Rodkin said he’s also sure his company can manage its way through the food-cost pressures, from global demand and government-mandated ethanol, that are hurting so much of the industry.
“Food business is a tough business,” Cramer said. But CAG is cheap, and the stock is priced as if ethanol will continue to drive food costs higher.
“If you think that we are at a peak in the price of food, you buy ConAgra,” he said. “If you don’t, you can’t pull the trigger.”
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