Cramer's Mad Money - The Most Bountiful M&A Year I Have Seen (8/11/14)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday August 11.

M&A Fever: Kinder Morgan Energy Partners (NYSE:KMP), Kinder Morgan (NYSE:KMI), Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP), Kraft (KRFT), Mondelez (NASDAQ:MDLZ), General Mills (NYSE:GIS), Pinnacle Foods (NYSE:PF), Kellogg (NYSE:K), Hain Celestial (NASDAQ:HAIN), WhiteWave (NYSE:WWAV), Campbell Soup (NYSE:CPB), B&G Food (NYSE:BGS), Clorox (NYSE:CLX), Kimberly-Clark (NYSE:KMB), Unilever (NYSE:UL), Brinker (NYSE:EAT), Darden (NYSE:DRI), King Digital (BATS:KING), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.A), Goldman Sachs (NYSE:GS)

Takeovers stimulate the economy, as evidenced by the announcement Monday of the takeover of Kinder Morgan Partners (KMP) by Rich Kinder's Kinder Morgan (KMI). Its MLP structure kept it from growing sufficiently. KMI, which is acquiring KMP, is worth owning. "This is the most bountiful M&A year I have seen," said Cramer. Growth is slow, so the antidote is consolidation, in many cases. Kraft (KRFT) has a 3.75% yield, reported a terrible quarter, but rebounded because of its high dividend and takeover prospects. PepsiCo (PEP) is leaving Coca-Cola (KO) in the dust, and one reason might be that Nelson Peltz is advocating a break-up. Cramer thinks Peltz should suggest Coca-Cola buy Kraft or Mondelez (MDLZ) to compete with PepsiCo's Frito Lay business.

General Mills (GIS) has little growth but can buy back stock. Perhaps GIS should use the money to buy Pinnacle Foods (PF). Pinnacle could also be bought by Kellogg (K). B&G Foods (BGS) could also be a takeover target, as well as Campbell's Soup (CPB). Short-sellers have been attacking Hain Celestial (HAIN), but the stock has been a winner. If General Mills buys Hain, it will have exposure to the natural and organic category. WhiteWave (WWAV) is another possible takeover target.

Neither Clorox (CLX) nor Kimberly Clark (KMB) has been growing; Unilever (UL) should take over one of them. Brinker (EAT) and Darden (DRI) are stale restaurant ideas that could be bought. There are dozens of retailers that can be improved by being bought.

Cramer took some calls:

King Digital (KING): "I don't want you near this."

Exxon Mobil (XOM) "XOM is my least favorite oil. It has little production growth. My favorite is Royal Dutch Shell (RDS.A)."

Goldman Sachs (GS) has done nothing as a stock, and it usually isn't a laggard. The stock may be a buy.

What Should Kinder Morgan Buy Next? Boardwalk Pipeline Partners (NYSE:BWP), Enterprise Products Partners (NYSE:EPD), Energy Transfer Equity (NYSE:ETE), Atlas Energy (NYSE:ATLS). Other stocks mentioned: Energen Corporation (NYSE:EGN), Ensco (NYSE:ESV), Access Midstream Partners (NYSE:ACMP), Williams (NYSE:WMB)

Cramer thinks Boardwalk Pipeline Partners (BWP) should be bought by the new Kinder Morgan. Boardwalk owns a substantial amount of pipeline assets, but yields only 2.1%, because it had to slash its payout. It has exposure to some of the fastest growing shales. Cramer liked KMP because it collected fixed fees for transporting oil and natural gas, and Boardwalk makes money the same way. It is a terrific play on the shift by utilities from coal to natural gas. This company has terrific visibility because of its fee-based business model. This company is focused on growth and is spending to make profitable acquisitions. The stock has moved up after good earnings, but it is still down from its 52-week high. The stock could thrive on its own, but it is likely it will be taken over.

Even if KMI doesn't buy more MLPs, there is still more room for acquisitions in the space. Enterprise Products Partners (EPD) has a strong balance sheet, a 3.8% dividend and has valuable assets. EPD got permission to export condensate, a form of lightly distilled crude oil. This is a huge game changer, since exporting crude has been illegal for decades. Energy Transfer Equity (ETE) could be another takeover, because its cash flows and distribution are expected to explode higher. Atlas Energy (ATLS) was an MLP Leon Cooperman recommended. It is relatively cheap and has a strong distribution. Those who own KMP should sell on the gain and buy KMI.

Cramer took some calls:

Energen Corporation (EGN) is a good stock, and Cramer would stay in it.

Ensco (ESV) got downgraded, but Cramer's charitable trust bought more. It has a 6% yield and a strong fleet. "Everybody has given up on this stock," said Cramer, and that is a time to buy more.

Access Midstream Partners (ACMP) is good and has been a gigantic winner, but Williams (WMB) is better for now.

Companies That Underpromise, Overdeliver: Priceline (PCLN), Apple (NASDAQ:AAPL), CBS (NYSE:CBS), Celgene (NASDAQ:CELG), Johnson & Johnson (NYSE:JNJ), Starbucks (NASDAQ:SBUX)

Some companies underpromise on their conference calls and overdeliver with their performance. Priceline (PCLN) is a strong company that tends to be underestimated. It tends to blow away earnings estimates, but it issues conservative guidance that causes a sell-off. "I can't believe it was happening again," said Cramer, who thinks people on the street would get wise to this. Cramer told investors to watch for this sell-off, and those who bought saw huge gains. Apple (AAPL) management also tends to give conservative guidance, as well as CBS (CBS), Johnson & Johnson (JNJ), Celgene (CELG) and Starbucks (SBUX).


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