It’s time Cramer clued in all you Home Gamers to a lucrative pattern that always seems to arise just before a company gets taken over. First, the leaks start, then people buy the call options, then the stock runs and the deal often happens anyway. Sometimes there is no deal. It falls apart or it never was going to happen to begin with. Either way, the stocks don’t seem to take a hit when the takeover never materializes.
Cramer points this out because the pattern is arising in Cleveland-Cliffs , a company he recommended a couple weeks ago. CLF is the largest supplier of iron ore pellets in North America, owning about half the capacity for the entire continent. An article in American Metal Markets, one of the trade papers, said Cleveland-Cliffs was in talks with CVRD. That started the whispers; the unsubstantiated rumors of a takeover which took the stock much higher. Today CLF blew right past its high, despite the fact that other metal and minerals companies were down, Cramer says. People think Cleveland-Cliffs will be bought.
RIO isn’t the only logical buyer. Cramer could see BHP Billiton or Rio Tinto swooping in. Those are the three largest global iron ore suppliers and any one of them could own the American iron market by simply snatching up Cleveland-Cliffs. Even if none of the iron companies want it, Cramer wouldn’t rule out a steel company buying it as a way to integrate vertically. He doesn’t see how CLF could stay independent with all that pressure.