Fortune Brands: Growth and Safety?

Cramer last week highlighted Fortune Brands as an early-cycle play on the return of housing. It was a catalyst-driven strategy hinged on the return of the U.S. economy.

But Fortune’s known for more than just faucets and cabinets. The company also makes Jim Beam, Canadian Club and Courvoisier, as well as a few other brands of liquor. And booze, along with Fortune’s accidentally high 4.6% dividend yield, offers backup to investors just in case that turnaround doesn’t happen on schedule. So this stock is both a good offensive and defensive way to play the market.

Both businesses are doing well, too, Chairman, CEO and President Bruce Carbonari told Cramer during Monday’s show. Liquor historically has been “a very stable business,” and that tradition has held up even during the past few lean months. Maybe consumers are going out less, meaning traffic at bars and restaurants are down, but entertaining at home seems to be on the rise. So sales are still being made in grocery and other stores where booze is sold.

As for its homes business, Carbonari is using an aggressive cost-cutting policy to tighten up the balance sheet as he waits for that sector to turnaround. In fact, it’s the company’s strong balance sheet, and its cash flows, that allowed management to increase Fortune’s dividend 5% this year – even despite the possibility that housing’s decline could continue longer than anticipated. Carbonari said the move was just a reflection of his company’s confidence in the business.

Carbonari hasn’t ruled out using some of that money for acquisitions. But he promised to be “very selective” about whom he’d buy, especially when the best returns are usually those generated internally, he said.

Cramer’s bullish on Fortune Brands. He said the stock’s a buy at these levels. And if FO drops enough to yield 5%, he recommended buying more.

Watch the video for more on how Fortune Brands is stealing shelf space at Home Depot and Lowe’s.

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