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Private Lessons: Actuant (ATU)
Cramer announced he is dedicating a week-long series to discussing possible targets for private equity firms which have loads of cash and pay a premium to take public companies private. He will be working from Goldman Sach's list of potential leveraged buyouts as well as his own research. Cramer commented private equity firms are looking for undervalued companies which are not managed well but generate a lot of cash. Cramer's first potential buyout pick was ATU, a company which produces manufacturing and industrial products, is a "classic cyclical stock" and a "magnificent cash flow generator." ATU has been using its money to pay off its debt and to buy small, low risk companies. Trading at the low end of its range, it is a "broken stock, not a broken company" comments Cramer, adding ATU is cheap. He is not concerned about the large number of shorts betting against the stock and predicts the ATU could rise from 8 to 13 points if acquired, and even if it is not bought, the company's fundamentals are turning around with 19% growth predicted for 2007.
In Search of Discovery Holding (DISCA)
Cramer calls DISCA a "money-making machine" which he likes even more than Viacom, because the cable company could "be bought, it could be sold... It could be cut up into little pieces. It can be sold all over the place," especially since cable properties are popular. He notes the company now has David Zazlov from NBC; "the man really knows how to consolidate," and has a shows which can be shown over and over again "endlessly." DISCA is a play on digital cable and high growth TV, and if it acquires the remaining 25% of Discovery Communications, the stock could rise to $25 or higher from $20.93.
Related: Stockreply takes a look at Discovery Communications
David Hannah commented the steel industry is strong, and has improved because of Chinese demand, and international growth. "It's been the consolidation at our mill supplier level," David Hannah said. He adds the mills have an improved pricing structure, are "run with a different attitude and run for the benefit of shareholders." Cramer predicts RS will go to $61 and also likes ATI.
Related: On April 11th Mad Money, Cramer recommended RS "on a takeover basis."
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