Cramer on ConocoPhillips' Break Up
When the right company breaks up, Cramer on Thursday said it can unlock a lot of value for its shareholders.
Take ConocoPhillips , for example. The oil and gas name will break itself into two companies, spinning off its refining business by the first half of next year and holding onto the higher-margin oil and gas exploration business. After announcing the news Thursday, the stock shot up about 7 points to more than $81 a share. The stock pulled back over the course of the trading day, as oil declined by more than $2 a barrel. The oil stocks tend to trade together because they are all part of the same basket, so the bad stocks take the good ones down. Cramer thinks the market's initial judgement about COP, that it should go higher, will prevail. So investors are getting COP at a bargain right now, he said.
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Cramer thinks COP could go to $104 a share based on Marathon's recent break up. He's confidant it goes higher because this break-up brings out value in the company. Its exploration and production side is growing at a much faster rate than the refining side, so as a stand alone company it deserves a higher multiple. Right now, that additional value is falling through the cracks, but Cramer thinks that won't remain the case forever.
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