Cramer's Mad Money - Will Pfizer Buy Allergan? (12/3/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Wednesday, December 3.

The Plaxico Burress Good Judgment Award

The Fed is finally getting it right in solving the housing crisis and is buying mortgage-backed paper. As a result, mortgage rates are dropping, homeowners can refinance and new buyers are appearing. Cramer is outraged that Bernanke didn’t implement this plan a year ago, since such an action would have spared the economy a lot of pain. He therefore gives Ben Bernanke the Plaxico Burress Award for Good Judgment.

In the Blood: Celgene (CELG)

Cramer would use the American Society of Hematology 50th annual meeting this weekend as a catalyst to buy Celgene which is expected to give guidance during the meeting. The Street is predicting revenue growth of 44%. However, this is not just a short-term trade; Cramer noted the company’s blood cancer treatment, Revlimid’s sales may hit $3 billion by 2012 and its orphan drug Vidaza, which has special exclusivity status, may reach $409 million in sales by 2010. Celgene has over 100 clinical trials scheduled to expand the usage of existing drugs and the company has earnings visibility, is flush with cash, debt-free and has room to grow. It is down $25 from its high and trades at only 23 times earnings. Finally, biotech stocks are likely to be favored with the Democrat in the White House.

Mad Mail: Foster Wheeler (FWLT)

When a viewer told Cramer he was writing a letter to Obama to suggest appointing Cramer to the position of SEC chairman, Cramer declared “…There’s so much stuff that I want to stop. And if they call me, I know all the tricks that [Wall Street traders] pull. And I’m going to end them. And I’m going to make the market fair again for people. Because everybody knows this market feels like it’s rigged everyday.”

Cramer told another viewer that it is worth holding onto Foster Wheeler because it is cutting back copper production and China will soon be a customer again. When someone asked if Yahoo was worth buying now that CEO Jerry Yang left, he replied; “I think that Yahoo! has a lot of pageviews. And anything that has that much pageviews, if you came in now, I think you could do a great job with. Jerry Yang was really bad.”

Cramer Plays Matchmaker: Johnson & Johnson (JNJ), Allergan (AGN), Pfizer (PFE)

Cramer praised Johnson & Johnson’s smart acquisitions of Mentor and Omrix, and thinks low prices caused by mass hedge fund selloffs can make other companies ripe for picking. He would make a match between Allergan and Pfizer. Allergan has been cut nearly in half, from $70 to $36 and Pfizer could use the growth Allergan would provide with its “Hollywood cosmetics”: Botox, breast implants and lap bands. Pfzier has $26 billion in cash, double the price it would pay for Allergan, and the acquisition would take Pfizer’s long-term growth from 1% to 14%. News of an acquisition would make AGN jump to $54 a share, and the company’s cost-cutting strategies might provide a reason to hold the stock even if Pfizer doesn’t buy the company.

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Comments

[User 206223:]

In my opinion be careful listening to Jim. I remember him telling listeners to buy Sears at about $150.00 and put it away. Sears was supposed to be the next Hathaway. Just look at a quote of Sears now.
Only weeks before Wachovia collapsed completely Jim told his listeners it is time to buy WB at arount $25.00. Look at WB now, kaput.
To me he is one of the most dangerous men in America. I refere to him as Mr. Sears. Sure he is not always wrong, but tell it to the listeners who lost bundles listening to him.
In my opinion he should lose his TV show immediately.

2008 Dec 04 08:22 PM

[richard n zind:]

Cramer said to "nab nabors" when it was selling at about $30....today it's at about $11....what's with this loser ??? He should have a muzzle installed on his face.

2008 Dec 06 02:17 PM

[Dan Jacome:]

He has a great point with PFE needing to do a deal, although, he forgets to mention how much competitive pressure Botox may come under over the next 2-3 years. Its eye care business is half if its sales and that part of the company seems better "protected" from competition.

Medicis is a company that will most likely get picked off before Allergan does. The price tag would be < $1B and the suitor would get the #1 dermal filler player in the country (which will also benefit from Baby Boomers entering peak years - fillers target older people, Botox typically people under 50) and access to a top acne drug - Solodyn - which wont go generic probably until 2011 or at the latest, 2013.

2008 Dec 08 12:16 AM

[Victhom:]

PFE will be better off continue internal R&D like ELI LILLY or Merck....Wait the market collapse to buy the best biotech at less than PE of 10...like Celgene is still not cheap...Amgen too...look at BMy trading at PE of 13 after Citigroup said BMY is a buy with target of $25...PFE on the other hand trade at 6.95 PE with dividend yield at 8%

Common Cramer...don't you know that Pfizer quit Ophtalmology...to concentrate of Rhumatoid...with Phase III with $4.5B product in pipeline also..25 in Phase III...with over 100 in phase I-II-III with $26B of Cash.....PFE can't be very patient.....because lots of Biotech trade still at PE of 25....like CELGENE...LOL

PFIZER going to stem cells and will soon sell lots of generic too like MRK...LILLY...etc...

2008 Dec 12 12:14 AM

[Victhom:]

HEY JIM....You should tell your reader to read this instead....They will make more money with Pfizer than Allergan...LOL (buy LOW PFE is better than High Allergan?? right??)

Ben Graham Would Buy Pfizer, Tiffany, Grant’s Says By Eric Martin

Dec. 10 (Bloomberg) -- Pfizer Inc. and Tiffany & Co. are among eight stocks that Benjamin Graham, the father of value investing and Warren Buffett’s mentor, would buy, Grant’s Interest Rate Observer said.

Cooper Industries Inc., Nucor Corp., Cintas Corp., Archer Daniels Midland Co., Molex Inc. and RadioShack Corp. also meet the seven criteria Graham presented in 1973 for stocks that a “defensive investors might buy with confidence,” according to the latest issue of Grant’s, which was released today.

“That there are as many as eight is a notable fact,” the newsletter said. “In March 2003, near what would prove to be the bottom of the post-Nasdaq washout, Grant’s could identify only two that met the grade.”

Graham favored companies that have “adequate size;” current assets that exceed liabilities by two times; 10 straight years of profit; 20 years of uninterrupted dividends; 10 years of earnings growth exceeding 33 percent; a price-to-earnings ratio of less than 15; and a price-to-book ratio that’s less than 1.5, according to Grant’s, an investment newsletter founded by James Grant in 1983.

“Security Analysis,” published in 1934, provided a road map for value investors including Buffett, the chairman of Berkshire Hathaway Inc.

An equal-weighted index of the eight companies Grant’s identified has surged 32 percent since Nov. 20, the day the Standard & Poor’s 500 Index dropped to an 11-year low.

To contact the reporter on this story: Eric Martin in New York at [e-mail]...

Last Updated: December 10, 2008 18:14 EST

2008 Dec 12 12:27 AM