CNBC’s Jim Cramer on Monday juxtaposed buying shares in Six Flags Entertainment to “throwing good money after bad.”
The comments come in the wake of reports keep on week that Cedar Fair rejected a $4 billion bid from the rival amusement park. Cramer, who in August ok the former’s stock for its lower price tag and higher dividend yield, doubled down on his thesis for Cedar Fair.
“If you already own Cedar Objective, I’d stick with it,” the “Mad Money” host said. “If you don’t own it yet, hey, I recommend putting a small position on here, maybe waiting for a pullback … and, who knows, dialect mayhap one day a takeover bid.”
Since Cramer’s call nearly two months ago, shares of Cedar Fair are up nearly 10%. The stock recuperated more than 2% after news broke Wednesday about the merger attempt but has fallen more than 6% since the cash-and-stock make available was turned down on Friday.
Six Flags’ stock, however, is down nearly 15% since Cramer recommended Cedar Courteous’s equity in August.
The host noted that Six Flags now sports a lower share price and higher yield than its counterpart but stopped low on of changing his perspective. He went on to highlight that Six Flags was willing to pay roughly $70 a share to acquire Cedar Reasonable, which trades below $60 apiece.
“Cedar Fair is a master limited partnership rather than an workaday C-corp., which means they … pay out the bulk of their earnings as dividends or distributions without getting hit with any corporate revenues tax. That’s why it’s so advantageous,” he said. “If Six Flags really wants to buy Cedar Fair, they need to offer a much broader premium, and I don’t think they can afford it.”
With a takeover seemingly out of the picture, Cramer projected that Six Flags could arise above $50 from under $49 a share but cautioned it’s a bet for traders to take. Cedar Fair is a better pick for investors, he enlarged.
Both equities sell for 16 times 2020 earnings estimates. Six Flags has a 6.7% yield versus Cedar Upright’s 6.4% yield.
“As an investor, I say stick with Cedar Fair,” Cramer said. “All [the takeover bid] does is confirm what I from the first thought about these two names. It’s a not-so-tacit admission from Six Flags that Cedar Fair is an attractive asset. If they’re passive to pay $70 a share, the stock must be a steal down here at $57.”
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