Jim Cramer, portfolio manager for the Action Alerts PLUS charitable trust portfolio, and research director Jack Mohr, discuss their current position in WhiteWave Foods Company (WWAV). Cramer says that there are two components that are driving WhiteWave’s stock: ‘the natural growth to the natural organic category’ and the potential takeover. In WhiteWave’s recent acquisition of Vega, there was the fear that WhiteWave had paid too much for the plant-based nutrition producer but it was later uncovered that because of the growth of this newly acquired asset, WhiteWave was actually paying the group average of three-times sales. Before this year’s sales were factored in, WhiteWave seemed to be paying over five-times sales, but as Mohr points out, Vega has grown 40 to 50 percent this year already so WhiteWave really only paid three-times Vega’s current sales. But WhiteWave isn’t the only company making acquisitions in the organic market; Hormel recently bought Applegate Farms and Campbell’s made some organics acquisitions of its own. Cramer reminds viewers though, that what is really important for WhiteWave is that while everyone is running in and buying up companies in the sector, WhiteWave is buying up categories ‘that are not easily made into private labels’ where margins are getting cut. Cramer says that these strategic maneuvers within the organic foods space means that if a company wants to buy WhiteWave, it is going to need to pay even more, which Cramer thinks is a very good thing.
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