TheStreet.com's Jim Cramer says this is the first real deal to take advantage of the new low prices of this era. Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Limited seating. Act now.
The Exelon (NYSE: EXC) (Cramer's Take) bid for NRG Energy (NYSE: NRG) (Cramer's Take) is what we need to see if we are going to find terra firma. We need to see healthy companies with good balance sheets going after other healthy companies that have balance sheets that won't let them do well.
If there were no credit crunch, NRG -- like Constellation Energy (NYSE: CEG) (Cramer's Take) before it -- would be doing just fine. In fact, you would be wondering what the heck it was doing so low. Reliant Energy (NYSE: RRI) (Cramer's Take) and Mirant (NYSE: MIR) (Cramer's Take) also fit the same pattern. These are all companies that need ready access to capital, and it doesn't exist right now.
NRG has a pro-nuke history and so does Exelon. Nuclear power has taken on an almost holy image in this country if the plants are already built because you simply can't afford to build new ones. NRG is one of the few utilities in the whole country that is trying to build plants, something that would be fabulous for Exelon and NRG's shareholders alike. It's a great match.
But will NRG's CEO David Crane take the offer? NRG, like so many other stocks here, has been pummeled. I wonder whether Crane thinks, "Let's just wait it out."
Everyone who has tried to wait it out has been wrong.
Maybe this time it is different.
I think Crane should take the offer. More important, I think this is the first real deal to take advantage of the new low prices of this era.
It is a good sign that one day we are going to get through it.
The first good sign.
Random musings: Futures signaling green light going into a big earnings week. So be careful, as it will take up all stocks -- including the ones that are going to miss earnings.
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RELATED LINKS:
Exelon Offers to Buy NRG for $6.2 Billion
Long Wait for Clean Coal, Nuclear Energy
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
10-20-2008 @ 11:04AM
nick said...
CRAMMER when are you going to get the gonads and call for the head of GE? You know this ass hole is what is bringing this company to it's knees. It was one of the last companys to stop trading with Iran. They were out for the last blood dollar they could get and a lot of my friends died over thir in Iraq because of the trading GE did with Iran. You going to tell the folks to buy anymore stocks like WAKOVIA?
10-20-2008 @ 12:53PM
nick said...
Crammer with your DEMOCRAT friends why don't you buy up all the foreclosed houses and put your ACORN friends in them. People like left wing nut CRIS MATTHEWS AND OLBERMANN should be able to spring for a few millions. Warren BUffett and Gates COULD COUGH up a few billion to put ACORN and the rest of these left wing nuts up on their street, along with where you live in your mansion.
10-20-2008 @ 5:05PM
DaveF said...
Nick, I doubt you have any friends. You do seem to have a problem with facts, you sound like someone who gets paid by the RNC to spread hate and miinformation. If you want to talk about American business dealing with terrorist states direct your ire at Cheney and Haliburton, Reagan and Bush I, during Iran/Contra they are the real experts, they also helped arm the same people who became Al Queada.
10-20-2008 @ 5:07PM
De baller said...
Don't be a prick Nick!! Cramer is just a squirrel trying to get a nut.
10-20-2008 @ 5:58PM
Swain said...
It is inappropriate to lump NRG into the same category as Constellation. NRG hedges (i.e. locks in natgas) baseload production; they don't have a power trading book like Constellation.
NRG does not fund in the short term debt markets. The company has plenty of liquidity ($1.4 BN cash + credit facilities). The company generates substantial cash flow and has one of the best balance sheets in the industry. Net leverage is slightly over 3x. This is less than several investment grade utilities and other companies.
To say that NRG needs to be rescued by Exelon is absurd. Exelon saw an opportunity to get some great assets at a very cheap price. As of today's closing price, NRG is still valued at a mere 6x FCF.