NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
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Don't Play Herbalife to Get at Ackman
Posted at 1:52 p.m. EDT on Wednesday, July 31
Let's face it. This whole Herbalife thing is a charade. Many of the people buying Herbalife don't know anything about Herbalife. Many don't care about the fundamentals or don't know about the point system and how Herbalife would prefer that you value the company on a point-per-share basis and not earnings per share, because Herbalife wants you to use the metric of sale points to grade the company. I bet most of the people buying Herbalife right now have never tried the product and never met anyone who has sold it.
They are doing it to break Bill Ackman, a guy who has to be the most hated guy in the Street since Gekko tendered for Teldar. They are trying to force Ackman to cover his Herbalife short or to get his brokers to buy him in through a short squeeze, and don't doubt this for a minute. It started with Carl Icahn and his legendary on-air spat with Scott Wapner on CNBC's "At the Half." But it has now escalated to a free-for-all against Ackman, betting that he can't bring his short in and that the Federal Trade Commission won't shut this stock down to get to Ackman's zero price target.
You know what's a shame? That somehow the football has become Herbalife, which actually reported a good EPS number, despite the "Ackman defense per share" line that Herbalife broke out. The revenue growth and cash flow growth were terrific. If somehow the company could get audited financials -- not the company's fault, all the fault of a bizarre insider trading deal by the auditor -- then I think it would be able to lever up and buy a ton of stock back, maybe even through a well-above-market Dutch tender.
However, what's really needed is an Ackman future, not Herbalife common stock. These hedge funds all really want to bet for or against Ackman, and it seems like the best way to do that is to take into account more than Herbalife. He won't have to cover unless there is a short squeeze, if he keeps hitting it out of the park with stocks like Procter & Gamble and Canadian Pacific . His investors won't care about their exposure to Herbalife if they made a ton of money in Air Products just by Ackman going after the company. Who cares about Herbalife if that's the case?
You see that the way that Herbalife's investors make money is to break Ackman. The way that Ackman makes money is to break Herbalife. But Herbalife the stock? Let's be honest: It has become an irrelevance.
Now I don't expect an Ackman future anytime soon, but I think it is only fair to say that Ackman has had some big wins to go with his losses like this and J.C. Penney , and without the whole panoply, I do believe that Herbalife is a ridiculous proxy for Ackman's fund, which is what these people are betting against.
You get me an Ackman ETF with puts and calls? Then we got something to invest in or short. Until then, I don't like Herbalife as a vehicle to bash or buy Ackman. It just doesn't have enough correlation.
But boy, oh boy, is it fun!
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.
Google Could Steal Facebook's Thunder
Posted at 12:38 p.m. EDT on Tuesday, July 30
I don't know if people realize that Google is like Facebook a quarter ago. Right now, the geniuses at Google -- and they are geniuses -- are trying to think of ways to make more money from advertising, and the Publicis-Omnicom deal gives me faith that they will figure out it.
Right now, the situation is kind of amazing. Facebook has figured out how to design programs that are just like what television offers: national ads for the national programs with local ads for the local affiliates, except they own them both.
Now, Google has its own programming and its own ad-serving system, and the great thing about the latter is also the bad thing: Google gives the advertiser a bargain but hurts the content providers, including itself. Unless you have a proprietary product with a proprietary ad sales force to sell that product in a way that can't be compromised by what's known as programmatic selling -- a cheap form of advertising in which you carpet-bomb every site imaginable, and the purveyors of the sites are offered a take-it-or-leave-it deal, and most take it -- you aren't going to make as much money as you should.
Incredibly, Google has created a monster here that only Facebook right now is immune to, hence the incredible run that Facebook is having.
But Google said it is just a quarter behind in doing this itself. Why should we not take Google at its word? I believe it has the smarts to figure this out.
That's why, even as Facebook soars here, I believe Google at this point is the better buy. Yes, you may have to buy it in a stock-replacement way, using deep-in-the-money calls to get some bang for the buck, but right now there is no doubt in my mind that it is the cheaper stock to own, if you are willing to own it until the next quarter is reported.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB.
- Bill Ackman and Herbalife; and
- tech giants Google and Facebook.