Bottoms Up?

If you believe, as Cramer does, that a turn in the economy is coming soon, then Fortune Brands could be a stock to own.

Here’s the thesis: The market tends to discount companies six months prior to a bottom, which would put us right on track for Cramer’s target date for the housing recovery – June 30, 2009. And since Fortune deals in cabinets and faucets, both early-cycle parts of the business, the time to buy FO is now.

Cramer’s covered Fortune Brands before, but he was focused then on the liquors divisions. Yes, Fortune deals in Moen faucets, Aristokraft cabinets and Jim Beam. (The company owns Master Locks, too.) But that’s a good thing. The booze component just adds a layer of protection to this investment should housing’s return not happen according to Cramer’s timeframe. Let’s face it – people don’t stop drinking just because the economy’s bad. In fact, they may be drinking more now. So Fortune can also play the role as a defensive stock while we wait for a recovery.

Another great backup here? The dividend. Fortune doesn’t normally offer a decent yield. But in this difficult market, the stock’s been battered down enough that the payout is bigger than usual – 4%. Cramer thinks the dividend’s safe because the company just raised it in July, and management wouldn’t do that if it expected business to worsen. Plus, Fortune has 176 million in cash on hand and access to $2.4 billion in credit, so surviving this economy shouldn’t be a problem.

Overall, this is a strong company with a great CEO, and it looks to be just the right moment to be a buyer of FO. At least Cramer thinks so.

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