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Cramer: Why Covidien is Now a Buy

Monday, 19 Dec 2011 | 7:04 PM ET
Cramer: Cash in on Covidien Break Up.
Breaking up can be a fantastic way to send a stock higher, says Mad Money's Jim Cramer, and now that Covidien is spinning off its pharma business, it unlocks a lot of value for shareholders, and is a screaming "buy".

Now that Covidien is spinning off its pharmaceuticals business, the stock is a buy, “Mad Money” host Jim Cramer said Monday.

The company , which makes medical devices and supplies, announced last week that it intends to make its pharmaceutical business a standalone public company.

“This is all about streamlining Covidien so the company can focus on what it does best—devices,” Cramer said, pointing out that the new CEO comes from a medical device background within the company.

He also thinks the pharma division has been dragging the rest of the company down. It’s historically been a lot more volatile and has much lower margins than Covidien’s fast-growing medical device franchise.

“Covidien has been trying to remake itself for a long time,” Cramer said, “and spinning off the pharma business is just the latest step as the company transforms from a cash-cow like conglomerate into a faster-growing, more nimble, and more profitable medical technology business.”

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