Cramer's Mad Money - Merger Mania (2/19/13)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 19.

OfficeMax (NYSE:OMX), Office Depot (NYSE:ODP), Heinz (HNZ), General Electric (NYSE:GE), Comcast (NASDAQ:CMCSA)

While some like to "fight the tape," it is clear that merger mania is upon us. OfficeMax (OMX) and Office Depot (ODP) are probably going to merge, a move that might be necessary for the survival of the companies. Heinz (HNZ), which Warren Buffett is buying, has been an attractive takeover target for a long time. General Electric (GE) is selling off NBC to Comcast (CMCSA). With these takeovers, and more on the horizon, Cramer thinks that "confidence is back."


Gold was a raging bull market that has gotten hijacked recently. Since October, gold, as represented by SPDR Gold Trust ETF (GLD) has not been bouncing back after selloffs. technical analyst, Tim Collins, sees a short-term 3-4% bounce for gold, but in the long-term, the picture doesn't show a clear upside. Gold mining stocks have been faring much worse than GLD. Cramer would avoid gold mining stocks, but would take gains in GLD. He would still hold onto some GLD, because he sees the ETF as "portfolio insurance," since "Gold goes up when nothing else does."


ADT (ADT) was spun off from TYCO (TYC), and since then, ADT has risen 30%. Cramer prefers ADT as a housing play to home builders, which have rallied dramatically. ADT creates technology to improve home alarm and security systems, and has 25% market share. A full 90% of ADT's revenues are recurring through long-term contracts. The company has a sizeable buyback and is going to continue this strategy. While earnings didn't seem impressive at first glance (ADT beat earnings by 1 cent with light revenue gains), on further analysis, it is clear that ADT's revenues increased a total of 12.9%, which was 4% higher than The Street expected. Since the stock has risen, Cramer would wait for a pullback to buy it.

CEO Interview: Nick Akins, American Electric Power (NYSE:AEP)

Coal is no longer king; it once was responsible for 50% of the U.S.'s power generation, but now has only 30% share. However, American Electric Power (AEP), the largest coal consumer for electricity, is cleaning up its plants to keep them in line with government regulations. The company raised its dividend payout by 60%, and CEO Nick Akins feels the EPA will "get the transition right" so the move away from coal won't be excessively painful for utility companies. AEP has dramatically reduced coal emissions, and has been working successfully with the EPA to produce energy and reap profits, in spite of the anti-coal sentiment in Washington.


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