Cramer: Weak Stocks Create Another Bull Market
That opportunity comes in the form of acquisitions.
Cramer noted that Chinese oil colossus CNOOC bought Canadian energy company Nexen for $15 billion, Rail operator Genesee & Wyoming acquired RailAmerica for $1.39 billion, Joh A. Benckiser laid out $1 billion for Peet’s Coffee, NRG purchased GenOn for $1.7 billion and Digital Globe gobbled up competitor GeoEye for $900 million.
“Now, you may want to dismiss all of these takeovers,” he said. “But I think that would be a mistake, so let’s break ‘em down.”
Cramer said CNOOC, like other companies in Korea, Japan, Norway and India, is indicative of those knowing where opportunity lies.
“Heaven knows the targets have come down low enough to be bought, while these acquirers are simply trying to get their hands on the resources they need, and they’re using the stock market’s gloom to make their moves,” he said.
What about Peet’s?
Cramer said it was “expensive,” with its stock selling for 35 times earnings.
But the buyer knows something beyond the numbers: “It knows that these successful coffeehouse properties are both few and far between, and hard to create.”
With GoeEye and Digital Globe, it was an easy merger. “Why not combine forces? Everybody benefits,” Cramer said.
When looking at NRG’s stock price, it appeared to be a laggard due to slugging growth.
“Suddenly it’s got real robust growth for the price of $1.7 billion, something that caused its share price to spike more than 8 percent,” he said, adding that it makes sense when the buyer’s stock gets a boost.
Genesee & Wyoming boosted its profile by buying Rail America, going “from an irrelevant short line player to a mini major rail in an environment where everyone seems to like the railroads,” Cramer said.
Tthe acquisitions in an era of lagging stock prices make the takeaway simple: “When whole companies are involved, it’s a very different story. The gloom that’s associated with the market does not pervade the companies that want to make their stocks go higher by growing via acquisition.”
Thus, the more investors abandon the asset class, the more companies will snatch up the bargains that creates.
Finding such great stock deals isn’t like finding a needle in a haystack, Cramer said.
“I think they are businesses that are worth a great deal to other companies, even if they’re not worth much to investors,” he said. “The problem with the conventional wisdom, though, is that we genuinely believe anything good must be like a needle in a haystack. “But if you put your hand in the haystack today, it got ripped to shreds by all these needles.”
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