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The Rail Deal: Koppers (NYSE:KOP), Greenbrier (NYSE:GBX), Trinity Industries (NYSE:TRN), CSX (NYSE:CSX), and Union Pacific (NYSE:UNP)
The rail sector is hot right now, and Cramer suggested finding an "oblique play" like KOP. Although KOP is up 46% since Cramer recommended it, 21 milllion railroad ties will be needed in 2007, and demand is outstripping supply. In addition to producing railroad ties and splitters, KOP is an "impure play" with a chemical business, which is one reason KOP is under the radar while the railroad cycle is on the move. For investors who want a pure rail play, TRN is the largest rail car producer in the U.S. Cramer predicts rail will continue to rise because ethanol requires rail transport, and he adds TRN also makes wind towers. In the past two years, Cramer has seen some "sweet moves" in the sector from CSX and Union Pacific which may be too expensive to buy right now and would purchase some KOP and TRN instead. However, he retracted his recommendation on buying GBX, and said it is not a rail worth owning.
Related: Notable Calls reports shareholders are demanding bigger dividends from rail companies.
Private Lessons: Darden Restaurants (NYSE:DRI)
Continuing his series of possible private equity takeover targets, Cramer discussed DRI, which owns Red Lobster and the Olive Garden. The company has "massive cash flow" and just enough obstacles, including slow growth, to attract a private equity firm. Cramer predicts DRI could be purchased at a 20% premium, and even if it remains on the shelf, DRI is still good to own because it is a "broken stock" and not a "broken company."
CFO Interview Gary Fayard, Coke (NYSE:KO)
International sales were the cause of KO's blowout quarter, with its emerging market growth in the double-digits and European growth at 11%. Japan is becoming a "critical market" for KO. Fayard explained why there is still time to invest; "We had a great start for the year, but if you look at the market we compete in ... it's growing faster than almost any other consumer area. We still only have 20% share globally. There is still a lot of ways to grow in this industry for us." Cramer said KO should move higher.
Related: David Neubert thinks KO CEO, Neville Isdell, is overpaid.
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