Cramer has a new method for predicting takeovers. Four of the fourteen largest buybacks have either been taken over or have agreed to be taken over in the last few months. Cramer thinks the other 10 are great buyback targets as well. Cramer has 3 picks out of these 10. His #1 pick will be after the Lightning Round. He also said that he is only focusing on buyout candidates that he thinks are good all on their own.
Cigna (CI) is on the list but he’s already highlighted it recently. Sonic (SONC) and Cracker Barrel (CBRL) would have been on Cramer’s list except that he thinks they are too vulnerable to consumer spending and too vulnerable to higher gasoline prices.
The #3 pick is United Stationers (USTR-NASDAQ) which has bought back 20% of its outstanding shares. The company should have improving margins and there are only three analysts covering the stock.
The #2 pick is Brinks (BCO-NYSE) that bought back 21% of its stock. He thinks the fundamentals are great on this one. This one is a home security play and a play for securely transporting financial and luxury goods.
What is funny is that since Cramer hates ETF’s so much, he neglected to tell you about PowerShares Buyback Achievers Portfolio (AMEX:PKW). This is an ETF that actively invests in companies who are buying back shares. As far as which of these are good and bad, United Stationers is one that has many competitors that go through periods where they look good and bad. They are ultra-sensitive to economic cycles and business spending. But Brinks on the other hand is one that is solid. The stock is up on its 52-week highs, but here is thing: this company already transports massive amounts of luxury goods that the millionaires and billionaires already use. This one makes sense, and it would have been a perfect play for Berkshire Hathaway earlier if the size was larger than $3 Billion.
Jon C. Ogg
May 7, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in any of the companies he covers.
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