CNBC analyst Jim Cramer has said that it might be a good time to invest in packaged food stocks that have lagged of late, and discussed names such as Procter & Gamble, Kimberly-Clark, Clorox, and General Mills.
While company-specific factors are at play, Cramer believes stocks like P&G and Kimberly-Clark remain undervalued and that the broader sector could be gearing up for a wave of mergers and acquisitions.
There's "too much opportunity to pass up," Cramer said, "given that these are currently among the most hated companies in the universe."/Block quote.
Kimberly-Clark is in the news for its bold takeover of Kenvue. Not only is the deal size (over $48 billion) turning heads, but Kenvue faces risks after the U.S. government linked its Tylenol pain reliever to a heightened risk of autism. Investors punished the stock, which is down over 13% since the deal was announced at the start of the month.
Cramer praised Kenvue's strong portfolio, which includes well-known brands such as Band-Aid and Neutrogena. Analysts have previously said that the two companies have complementary product portfolios, and Stocktwits data shows growing interest in Kimberly-Clark's stock among retail traders.
Cramer lauded Procter & Gamble as an inventive company that has the size and scale to make its products more affordable. Notably, the company posted stronger-than-expected first-quarter results late last month, driven by robust sales of personal care and beauty products. However, its stock has since given up all the gains that followed the earnings release.
A Stocktwits user said "$PG sitting a major support and a nice wedge might reverse soon. 6mo out or LEAPS ideal."
Clorox, one of the S&P 500's laggards, also drew Cramer's attention. He said he remains a fan of its flagship cleaner and other brands such as Burt's Bees, Hidden Valley, and Brita. Cramer added that investors open to taking some risk could consider General Mills — but mainly as a takeover play, given that the rise of weight-loss drugs continues to weigh on food stocks.
All of the stocks mentioned above are in the red for the year. Clorox and General Mills have declined 35.5% and 21%, respectively, while Kimberly-Clark is down 21.4% and P&G is down 11.4%.
The Stocktwits retail sentiment was 'neutral' for PG, KMB, and CLX, and 'bearish' for GIS, as of the last reading.
Speaking of an adjacent sector, Cramer expects M&A activity in pharmaceuticals and suggested keeping an eye out for Johnson & Johnson and Amgen.
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