Mad Money

Jim Cramer: Secret Bull Story Developing in Food Niche

Digging for the Best Bull Markets

Sometimes the best bull stories develop in out-of-the-way areas of the stock market.

And Cramer suspects that's exactly what's going on right now in an area related to retailing – something called food packaging.

Err – what's food packaging?

A great example, said Cramer are those new dip and squeeze ketchup bottles introduced by Heinz, where you can either squeeze the ketchup out or pull the thing open so you can dip your food in the ketchup.

In fact new packaging is all the rage right now.

"We're in a moment where the big packaged food companies are spending big money to try to take market share and aisle space by coming up with new ways to package their old products," explained Jim Cramer.

Largely, if new packaging piques consumer interest – it can drive sales.

"And in this business, it really comes down to two companies that you probably have never heard of," Cramer said, "Bemis, (BMS), which is a long-time leader in packaging with a decent 2.8% yield, and , which came public back in October with an IPO that flopped, down 5% on its first day, but since then the stock has been red hot."

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Cramer feels that both of these companies bear watching – he calls them real innovators that use science and technology to develop better kinds of packaging. However, if you can only put money to work in one – which should it be?

"Depends," said Cramer. "I like both stocks."

In a case such as this, the question becomes not, which one is the better buy, it's which one is more suited to your investing style.

Berry Plastics

"If you're willing to take a risk, then I'd tell you that Berry Plastics has the most upside. However, this stock is not for the faint of heart and if things go wrong, they could go wrong very badly," Cramer said.

In other words, Berry is the high risk, high reward packaging play.

On the plus side, Berry takes a very high tech approach to their business. "They have a major design facility in Indiana where Berry can design a package and create a prototype using 3D printing technology in a single day. So customers can come in and see what they'd be getting almost instantly, something that should help the company win more contracts.

"Also, Berry has developed a revolutionary packaging technology, they're using polypropylene to make cups that are more durable and environmentally friendly than the traditional polystyrene cups that you probably drink your morning coffee out of. This could ultimately be a big deal," said Cramer.

And they already have an impressive client list; "Kraft, Nestle and Procter & Gamble are already customers," said Cramer.

However, Berry may also be facing some serious challenges.

"For starters, the company has a hideous balance sheet, with $4.5 billion in debt, and of that, $2.1 billion comes due in 2015. If Berry can clean up its balance sheet by refinancing and reducing its borrowing costs, then the earnings could get a big boost. That said, when you see a balance sheet like this one, it's a serious risk, because if business gets worse, Berry doesn't have much financial flexibility," said Cramer.

Also, Apollo, the giant private equity firm, owns 54% of Berry Plastics. "That means Apollo still has controlling interest in the company, and if they decide to sell their position down the road, it could crush the stock."

"These two negatives are why Berry's selling for just 13 times earnings despite having a 13.5% long-term growth rate," Cramer said.

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Bemis, on the other hand, is more conservative.

"This company is a leading player and it has the highest exposure to the packaged food group in the industry. Plus, the company's been cutting costs fairly aggressively, and its largest meat packaging customers, Hillshire Brands, Hormel, Smithfield, and Tyson all reported sequential volume improvements in the latest quarter and gave positive commentary about where volumes were headed. That's excellent for Bemis," Cramer explained.

"This stock may not have the sex appeal of Berry, and it's more expensive, selling for 15 times earnings with a 7% growth rate, but you can sleep at night knowing the balance sheet is clean and the dividend is there to cushion you if anything goes wrong," he added.

Call Cramer: 1-800-743-CNBC

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