• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / U.S. Equity

Reinvention Can Bring Rich Rewards for Investors

It's not easy to reinvent a company, but it can happen. 
By JIM CRAMER Nov 23, 2015 | 12:15 PM EST
Stocks quotes in this article: PFE, AGN, AA, DBD, DLX, GME, TSN, CPB, HRL, GIS

Few things are more difficult and more frustrating than reinventing your business, but reinvention drives so much of what we see happening in this market.

This morning, Dividend Stock Advisor portfolio holding Pfizer (PFE) is trying to reinvent itself by buying Action Alerts PLUS charity portfolio name Allergan (AGN), the cobbled-together-drug company with a low-tax Irish domicile, in order to become more efficient with its overseas capital. Allergan affords Pfizer a way to do it and -- while it cost Pfizer a pretty penny to do so, giving away a huge number of shares, 11.3 -- Pfizer's confident that the reinvention will be a good one. Allergan allows Pfizer to get a bunch of new drugs and the benchmark drug, Botox, of which Allergan CEO Brent Saunders has raised the price while simultaneously coming up with new uses.

Perhaps Pfizer can split into Old Drug Co and New Drug Co with this merger. In the meantime, you are paid a good dividend to wait. The market doesn't like the deal, in part because Allergan had so much going for it on its own. I know that my charitable trust bought Allergan because we bought into Saunders big-number vision for the future. I still do, but the tie-up with Pfizer seems to convolute the turn. Reinvention in progress?

Then there's Alcoa (AA), which has been producing aluminum since its founding in 1886. In the last few years, under Klaus Kleinfeld, the company's been trying to reinvent the use of the metal, finding terrific ways to integrate it into trucks -- the Ford F 150 made with aluminum was just awarded the Green Truck of the year by the Green Car Journal, because it "light weighed" with Alcoa aluminum. The company's bulked up on aerospace, which is in secular growth mode. And this year Kleinfeld decided to split the upstream, or raw metal side of things, from the proprietary aluminum engineering side.

Today, my Squawk on the Street partner David Faber broke the news that activist Paul Singer's Elliott Management bought a 6.4% stake and seeks a constructive dialogue with management. Elliott believes that the company's worth a great deal more than Kleinfeld told me on Mad Money. I don't think Kleinfeld disagrees, and I do believe he will welcome any dialogue. That said, the stock's been terrible both before and after the breakup, because investors feel that the upstream, aluminum portion, is being crushed by Chinese dumping.

Kleinfeld has asserted that the world will be in deficit position with aluminum because of increased use, but the Chinese do confound people with their aggressive sales of excess aluminum, so there's no real way to bring out more value until we actually see the separation. Candidly, this is an odd one, because the activist is trying to reinvent the reinvention.

Or how about Diebold (DBD), born in 1859 as a safe and vault company, which then reinvented itself as an automated teller machine company in the 1970s? Today it bought a German company, Wincor Nixdorf, for $1.8 billion in cash and stock, making it the world's largest ATM company. I think the deal is a shrewd one, because Europe's coming back and because Diebold needs scale. This one gives it exactly that, and I can't wait to speak to the company's CEO, Andy Mattes, about the acquisition. Part of the reinvention here has been on the software side, where Diebold's offered a host of security solutions with high margins. Being the biggest ATM maker, eclipsing NCR with about one million cash machines, sure will help that software and services component. It's a big deal at a big price, but Diebold has to be bolder if it is going to dominate.

Or how about Deluxe Corp (DLX), which rang the opening bell to celebrate its 100th anniversary. Here's a company that's trying as fast as it can to become much more than a check printer, and I think it is succeeded with ancillary products that banks want to grow their own business. I'm going to sit down with Lee Schram, the CEO, tonight on Mad Money to see how far the company has come and whether it can stay one step ahead of the plastic posse -- or much more than that.

GameStop's (GME) on the decline today, a missed quarter, which has to be regarded as a step back for its transformation out of just a retailer that sells games. It's not easy, when that's in your DNA and you are hostage to a game roll-out schedule. I think that the reaction might be overdone, but there's more later.

Sometimes we are getting turns in business despite reinvention. I am shocked that Tyson's (TSN) purchase of Hillshire Brands last year didn't give it more of a boost when it reported today. I didn't want a pure chicken play, which Tyson was known for. That said, with feed down and prices of chickens up, this was a truly blowout quarter despite the Hillshire acquisition, which was hurt by higher meat costs and lower margins.

Some reinventions are on the fly. We hear from Campbell's Soup (CPB) and Hormel (HRL) tomorrow,   both of which are joining General Mills (GIS) in frantic bids to become more natural and organic. To me, CampbeIl's a buy if it is doesn't blow away the numbers, because it is work in progress. Hormel's ahead of it, with the shrewd buy of Applegate Farms.

I love reinvention. But I don't like reinvention that stalls. You can get lucky like Tyson. However, the rest require great skill. Not easy, but it can happen and when it does, you get richly rewarded, as we are seeing in the case of Hormel, and I think will see in many if not most of the others mentioned here.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AGN.

TAGS: Investing | U.S. Equity

More from U.S. Equity

I'm Organizing a Bottom-Fishing Expedition

Bret Jensen
May 22, 2022 11:00 AM EDT

It is easy to see the value of this retail play.

Retail Stocks Are Moving Fast: Here's One That Might Be Worth Catching

Jonathan Heller
May 20, 2022 11:30 AM EDT

It is refreshing to visit a store that has the items in stock that it claims to on its website.

Pressure Keeps Building for a Significant Market Rally

Guy Ortmann
May 20, 2022 10:04 AM EDT

Here's why we believe some selective buying is currently warranted.

Index Supports Fail as Data Say 'Buy'

Guy Ortmann
May 19, 2022 10:28 AM EDT

Insiders continue buying as traders extend short leverage.

The Indexes Are No Longer Covering Up How Bad This Market Really Is

James "Rev Shark" DePorre
May 19, 2022 7:57 AM EDT

This bear market has been unusual because it has proceeded on a rolling basis.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login