Cramer: A delicious stock about to break out
Jim Cramer found one under-the-radar stock that investors have forgotten, though its products stock almost every kitchen in America.
Back in 2012 Kraft (NASDAQ: KRFT) broke itself up, and while Kraft Foods got tons of attention when was acquired by Heinz, most investors forgot about the other division-Mondelez International (NASDAQ: MDLZ).
Mondelez is the snack food and beverage company that owns such brands as Oreo's, Chips Ahoy, Triscuits, Ritz Crackers, Trident gum, Cadbury chocolate and cream egg and Toblerone, just to name a few.
"The thing is, Mondelez has hit some serious bumps in the road in recent years...however, lately, Mondelez has gotten aggressive about fixing its business, and the stock has suddenly become an outperformer," the "Mad Money" host said.
This recent rally has prompted Cramer to dig a little deeper and find out if it is for real.
Unlike domestically oriented Kraft Foods, Mondelez is a global brand. It derives 40 percent of sales from Europe, 20 from North America, 15 from Latin America, 13 from Asia Pacific and the remainder from Eastern Europe, the Middle East and Africa.
This means Mondelez has been a victim of the strong dollar recently, because when it converts its sales into weak foreign currency, it will take a hit. However, now that it seems that the dollar has peaked versus the euro, Cramer anticipates that this headwind will turn into a tailwind within the next six to eight months.
What really amazes Cramer, though, is its domination of the snack and candy market. It is No. 1 globally in biscuits, chocolate, candy and powdered beverages. It is also No. 2 in gum and coffee. Essentially, its brands are staples in homes around the world.
And while the company has been able to deliver the bottom line, Mondelez has been plagued with declining revenues and didn't even measure up to peers like Hershey and PepsiCo.
Ever since its spinoff in 2012, it has also been trying to streamline production, drive new product innovations and cut costs. However, it has only recently been able to deliver on any of this.
In particular, management has three priorities for a turnaround. Its first priority was to focus its portfolio more narrowly on snacks. It also aimed to reduce its bloated supply chain and overhead costs and invest in growth.
But the real reason why revenues have been shrinking is because the company has been discontinuing many of the lower-margin product lines in order to streamline into more profitable businesses.
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Noted activist Nelson Peltz also has about a 3 percent stake in Mondelez, and Cramer suspects that many of the margin gains are from Peltz's constant pressure to eliminate corporate overhead and improve margins via better manufacturing and supply chain management.
"I think Mondelez has what it takes to go higher, even if Peltz's dream doesn't come true," Cramer said.
Cramer anticipates that this company could have truly phenomenal growth down the road, especially for a packaged-food play. And if the dollar really has peaked, as Cramer thinks it has, that means this is one stock that is getting ready to break out and pull major gains.
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