Invest in America: The Garden of Eaton
For the last "Invest in America" segment of another volatile (is anyone else getting tired of that word?) trading week, Cramer brings on Sandy Cutler, CEO of Eaton, one of the market's surprise stories of late. It's one of those "accidental high-yielders-companies that paid paltry yields that have been transformed into generous, juicy ones because of the massive declines in their stocks." These kinds of stories and these kinds of companies are Cramer's fave. Eaton once offered a slight 2% yield during its 52-week high of $99, but now boasts more than double that: a 4.8% yield at where the stock is trading.
Cramer: "Buying accidental high-yielders like Eaton when they're down and then scaling out when the stock rises and the yield falls below 4%, as Eaton's did intraday last Wednesday November 5th, only to buy the stock back as it falls again, has been one strategy that actually works in this miserable excuse for a stock market."
Eaton's main business was primarily auto systems -- electrical, fluid, transmissions and drivetrains. In recent years it moved away from the somewhat cyclical auto industry and, through a number of acquisitions, is geared now more towards industrial electricals: high energy transformers, capacitors and energy safety and maintenance products. This business is 46% of its sales and Eaton is "a much better company than it was back in 2003."
Eaton's CEO, Sandy Cutler, joins Cramer via satellite and discusses how he anticipated the slowdown and scaled back production. Also discussed is the "sweet equity offering" he made in April at $84 a share (more than double the current price) in order to decrease debt and bolster the company balance sheet to help weather the "recessionary storm without taking on water."
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