In a market hungry for spin-offs, CNBC’s Jim Cramer keeps an eye out for company break-ups that could prove to be lucrative for investors.
That’s why the “Mad Money” host caught sight of the “corporate divorce” between commodity chemical giant Huntsman and its recently spun-off entity, Venator Materials, which came public at $20 a share and has since reached $23.
Cramer thought Huntsman timed the spin-off very well. Venator took Huntsman’s titanium dioxide business just as demand in the titanium dioxide industry started to pick up again.
Plus, Venator has its hands in the recovering U.S. and European markets, and Cramer thinks Europe’s economic rebound will be strong and long-lasting.
“Venator Materials may not be the sexiest company ever, but … this spinoff came at the ideal moment, right when Venator’s core titanium dioxide business is experiencing a real renaissance,” Cramer said. “This story has a lot going for it, more than almost all the other spin-offs I’ve heard of, and unlike so much of the market, this is a cheap stock. I say the potential rewards dramatically outweigh the risks and Venator’s stock makes a ton of sense to buy in this wildly pro-spin-off market.”
In many ways, Cramer finds each trading day in the stock market to be very similar to a good fishing trip.
“This is like fishing, catching a 40-inch edible fish every day, each different from the day before,” Cramer said about the bounty of high-quality stocks.
Wednesday’s catch was the stock of McDonald’s. Shares of the fast-food chain broke out to all-time highs on practically no news, closing above $163 a share. Despite its lack of obvious upward drivers, Cramer said the inevitable analyst recommendations would likely help, not hurt.
“This was a gift. I’m calling it a 40-pound striper caught surf casting,” Cramer joked.
But Cramer couldn’t help but wonder why such different situations are all working for these stocks, so he compiled a list of reasons for why the market is brimming with winners.
Since Sports Authority went bankrupt in 2016, Cramer has watched the sports retail and athletic wear cohort endure widespread weakness.
At first, the shortcomings were understandable, the “Mad Money” host said. Sports Authority, once the nation’s largest independent sporting goods retailer, was shuttering its stores, leaving fewer places for consumers to buy athletic products and an overflow of inventory.
“But now we’ve lapped the store closures and yet things just keep getting worse, something very few foresaw,” Cramer said.
Cramer argued that Sports Authority’s demise, which began with a leveraged buyout and ended with a botched restructuring program and crushing debt, cast a visible shadow on the sports retail industry.
“Wal-Mart’s being re-rated. This is an important term and I want everyone to understand it,” Cramer said. “This company is actually doing something that’s supposed to be theoretically impossible: it’s upping its spending on e-commerce; developing systems that will make Jet.com, one of its subsidiaries, a formidable competitor; it’s increasing its buyback by $20 billion; it’s paying people more while improving the store experience and it’s increasing earnings, plus possibly even beating Amazon.”
Even better, Wal-Mart shares are trading at only 19 times earnings, Cramer said, adding that his only regret is not pounding the table more on the big-box retailer’s story.
Finally, Cramer sat down with Clay Siegall, the co-founder, chairman and CEO of Seattle Genetics, on Wednesday to hear more about his company’s pipeline of cancer treatments.
Seattle Genetics currently has only one product on the market. Adcetris, its FDA-approved Hodgkin lymphoma treatment, has been performing strongly in studies performed on newly diagnosed cancer patients, a new development in the company’s ongoing research, Siegall said.
But that’s no longer the biotechnology company’s only treatment. In partnership with several other pharmaceuticals, Siegall said Seattle Genetics is developing treatments for bladder cancer and cervical cancer.
“Seattle Genetics is really changing from a one-drug company to a multi-product oncology company addressing unmet medical needs,” the CEO said.
In Cramer’s lightning round, he rattled off his take on some callers’ favorite stocks:
Energy Transfer Partners: “That is a horrible stock and I want you to sell it tomorrow morning. And I’m not kidding. And I mean it.”
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Source: Investment Cnbc
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