So much to like.
First, there are the self-helps: Dow (DOW) and Kraft (KRFT). The Kraft deal created what can only be described as the Newly Anointed Consumer Packaged Goods name that all portfolio managers clamor for. You have 3G and Warren Buffett behind the deal, so you have immediate imprimatur. The 3G guys have taken out immense costs in Heinz and raised sales. They can do that with Kraft while taking that domestic company international.
Of course, the higher Kraft goes, the more likely they can go buy something that's natural and organic to go with their many pantry entries. It's the Actavis (ACT) of food, to use an analogy to another red-hot stock. It can go higher still, but it's had a pretty monumental move. Just shows how much institutions crave a growth name in that moribund space.
Dow, meanwhile, is taking a page from the PPG (PPG) playbook, offloading its cyclical commodity plastics business, leaving almost all proprietary businesses behind. Dow gets $5 billion and it has a 50.5% stake in its new partner, Olin (OLN). You kill two birds with one stone: You get a nice payday from Olin and you remove a business that chewed up a lot of cash and made the stock way too linked to oil. Whenever oil went down, you would see Dow go down. This deal should break the linkage and immediately raised the price-to-earnings multiple. I think the new company can earn $5 a share -- helped by a buyback that can now easily retire 50 million shares -- and I think it deserves an 18 multiple. That would give you a double, precisely what you got if you held on to PPG after it transformed the company.
That stock's such a bargain below $50 as the analysts scramble to figure out how much the deal is really worth. When they get there, it will be much higher.
I also like that investors are seeing through near-term troubles in some stocks. Take a look at Restoration Hardware (RH), which is doing well after an initial decline of almost 5% because it said on its call that 2015 would be a bridge year with some disappointment for those who want a blowout.
The company then gave you some terrific guidance for 2016, which investors are willing to hold out for because the story is that powerful. That patience is a very good sign.
Finally, I like the action in the cruise ships given Carnival's (CCL) amazing numbers today. The combination of the staggering decline in the price of oil -- off 38% -- and the addition of new fees on board resulted in some fabulous earnings, much better than expected. Not only did this move Carnival, but the pin action to Royal Caribbean (RCL) is monumental.
These are all good signs that the week could end on a more positive note than it started.
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