Cramer's Morning Take: P&G & Honeywell 10/8/24

Jim Cramer (0:02)

I'm Jim Cramer, and you're about to hear a sample taken directly from today's CNBC Investing Club morning meeting.

Jeff Marks (0:10)

So we did have a portfolio action today. Exited, Procter and Gamble took a nice gain there. Stocks up about 14% this year, plus some dividends.

Jim Cramer (0:19)

Well, and we did sell, yeah, this is where we're going to end.

Jeff Marks (0:21)

Yeah, and we've been debating for weeks, you know, what do we do with the rest of Procter? And ultimately, we decided to sell, because it does trade at a premium to the S&P. It's a very defensive, low growth name, but as the Fed cuts rates, had a really good job number last week, too, that just looking for more, better growth opportunities.

Jim Cramer (0:40)

Right, and that's why I'm heavily focused on the financials. Come to speak, you know, I'm looking at BlackRock, looking at Blackstone. And they report later this week BlackRock. I also feel that we're now getting to the point where a consolation, if it's really an economic play and the Fed cutting rates, you want to be there. And I have to tell you, I would buy Honeywell off the stock for unchange here, honestly.

Jeff Marks (0:58)

Yeah, look, I agree with you with the Honeywell spin. Really good news today. They are spinning off their advanced materials business, tax-free spin-off by the end of 25 or early 2026 Could be worth 10 billion, according to the journal. That's versus Honeywell's market cap of around 130 billion.

Jim Cramer (1:12)

The ennui here is incredible, Jeff. There's just ennui.

Jeff Marks (1:15)

Yeah, so this is all part of their strategy. They want you to align the core business around automation, the future of aviation, sustainable energy, the energy transition.

Jim Cramer (1:27)

Sustainable energy, by the way, that's that area. Look at the stock of carrier. Look how carrier is done, because that's what they're doing. Look at train. That's what Honeywell wants, and I got to tell you, carrier just did nothing for a long time, now they did by that carrier division. But I think that I've been critical of these guys because I said, where's the spin? Where's the, well, when they give me the spin, the break up, you can't then say, too late. This is a good situation. It's down 2% for the year. This is what people should be buying.

Jeff Marks (1:55)

Yeah. We've seen a lot of success with conglomerate breakups. Obviously, GE was a big one. 3M is rallied with the splitting off of Solventum. So this advanced materials business, it does have really strong margins, greater than, better than peers. So you can expect the company to trade out a premium. Then the parent company, it improves the organic growth profile, it's neutral on margins.

Reduces some cyclicality. So I think there's an argument to be made that the quote unquote new Honeywell could trade out a premium to where it is today. They also said on the call today, third quarter earnings per share will be at the upper half of the guidance range, about in line with consensus, but I think it's worth mentioning. And they are committed to more portfolio actions, whether it's the IPO of that Quantinium business, potentially selling the protective equipment business as well, still looking to make more acquisitions too. So, it's this whole portfolio simplification around the growth opportunities where they want to be aligned.

Jim Cramer (2:59)

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SPEAKER_3 (3:14)

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