Cramer: My play on British booze with 3 ways to win

With the possibility of the Federal Reserve raising interest rates next week, Jim Cramer aimed to find high-quality stocks that can withstand a slowing U.S. economy.

Diageo, a British liquor company, is the world's largest maker of spirits, with popular brands like Johnnie Walker, Ketel One, Smirnoff, Captain Morgan and Guinness beer.

"With shares up 3 percent year-to-date, I am feeling increasingly like Diageo is an idea whose time has come. Right now this company is giving you not one, not two, but three potential ways to win, and I bet it could have a lot more room to run," the "Mad Money" host said.





Young adults drinking at a bar
Adam Berry | Getty Images

The first payoff is that Diageo is based in the United Kingdom. After the Brexit vote, the value of the pound fell dramatically versus the dollar and euro over fears of Britain's economic outlook.

While weak currency makes imports more expensive, it's a gift to exporters, because it makes products more competitive overseas. Thus, the plunge in the pound has been great for Diageo, since it is a huge exporter of scotch.

The second factor is China's rebound. Casino and vice stocks took a hit when the Chinese government decided to crack down on corruption and junkets in Macau in 2014. China was a huge market for Diageo, so the clampdown affected business.

However, Macau gambling business picked up in August for the first time in two years, which told Cramer that the anti-vice stance is softening.

"In the end, the Chinese communists who run things ultimately care more about economic growth than keeping their hands clean, because growth is what keeps them in power. All the more reason to like Diageo here," Cramer said.

The third big reason Cramer likes the stock is because it could be a potential takeover target. After consolidation in the liquor business in the past few years, Cramer suspects that Diageo could be next. He wouldn't be surprised if serial acquirer AB InBev gobbled up the company.

Another bonus to Diageo's bottom line, Cramer added, is that the company appointed Javier Ferran to its board. He has background in private equity and served as the CEO of Bacardi over a decade ago. Ferran is set to take over as chairman of the board starting next year.

Given that Diageo has underperformed in the past few years, Cramer expects to see cost-cutting to influence company growth. He also expects aggressive capital deployment in the form of deals or a buyback.

"Put it all together, and Diageo is exactly the kind of foreign stock that is worth buying into any sell-off caused by domestic worries," Cramer said.

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