Cramer: Beware Too Much M&A Frenzy
Don't get suckered in!
That's how I feel about the now takeover-rumor-a-day fodder that we see in what is one foot away of a frothy market. I say one foot away because the valuations are still low enough that there's room for more deals than we have already have. It's just that the mill is too ginned up for my taste.
Just take today. We woke to a Swedish financial tablet report that Joy Global (JOY) might be in the crosshairs of Scandinavian giant Atlas Copco, which, among other businesses, makes mining equipment like Joy Global.
Now, I have been a huge fan of Joy and recognize that it is one of the premier mining equipment companies in the world with a huge business in China, India and the United States. But the company acknowledged that there's been plenty of weakness in the United States because of slowing coal production, that China's been slowly picking up and that India's not big enough to counter the headwinds from the U.S. and the Peoples Republic.
But the company does have a fabulous installed base and a terrific service revenue annuity stream that does make the company's earnings more consistent than you would otherwise expect.
I just don't think you should chase it. If the rumor turns out not to be true, the stock falls quickly to the low $60s.
Or how about the note out of BMO Capital this morning that Kohl's(KSS) could be an LBO target because it has terrific cash flow and because it owns cheap real estate. I like to shop at Kohl's. I go through shirts constantly because of the pancake makeup that gets ingrained into my collars and Kohl's has some inexpensive shirts that I can afford to throw away after a few wearings. It has terrific slacks and it is my go-to place for socks. I've also bought a lot of kitchen goods there.
But is this really the right time for an LBO of a department store? Is this the moment that you could see a bid 30% higher than where the stock trades right now, as BMO suggests? Sure, the last quarter was OK, but you could get hurt buying it up here if nothing happens and I would pass up on the opportunity.
Finally there is the oft-rumored Best Buy (BBY) . A local paper in Minneapolis says that Best Buy founder Richard Schulze may still bid for the company. Yep, the Minneapolis Star Tribune says a deal is still on the table.