Disrupters are the biggest winners — Kraft Heinz take note

Investing


Innovative companies have been some of the biggest winners when the stock market rises and it’s a theme that established names should take note of, CNBC’s Jim Cramer said Wednesday.

All of the major markets made gains during the session—the Dow Jones Industrial Average added about 148 points, the S&P 500 increased 0.7 percent to top 2,800, the Nasdaq closed up 0.7 percent—powered by the tech and semiconductor sectors.

Facebook, Google-parent Alphabet, and Amazon with their targeted ads have disrupted traditional advertising and ad-supported media, which is getting behind subscription models and paywalls, Cramer said. Financial technology stocks like Visa, PayPal, and Square, among others, are changing the way people bank and manage their money, he added.

“Trying to reinvent your business has its risks, but standing still may be an even dicier proposition,” the “Mad Money” host said. “You either disrupt or you get disrupted—the companies that do nothing have the stocks that should be sold.”

Cramer also pointed to the health care sector where DexCom and Tandem Diabetes have products that have transformed diabetes treatment, changing the insulin pump market once dominated by Medtronic and Johnson & Johnson.

The companies that don’t disrupt themselves first end up like Kraft Heinz, Cramer said. Their stock price tumbled just shy of 25 percent in 2019 and more than 50 percent in the past year. Kraft Heinz could end up like Campbell Soup, ConAgra, Kellogg, and Dean Foods if it doesn’t make moves, he said.

Cramer recommended that the household food and beverage brand should follow the lead of famed activist investor Nelson Peltz, who sits on Procter & Gamble‘s board and once sat on that of Kraft Heinz. Peltz joined Aurora Cannabis as astrategic advisor on Wednesday and said he thinks the company is “poised to go to the next level across a range of industry verticals.” The pot stock closed the session nearly 14 percent higher.

The host thinks cannabis could disrupt the opioid drugs, animal health, tobacco and even alcohol industries. Companies like Altria and Constellation Brands have already jumped in the marijuana game, he noted.

“That’s why I think Kraft Heinz needs to move quickly. It’s urgent that they sell Maxwell House and Breakstone’s sour cream and cottage cheese, then take the money and move aggressively into cannabis,” Cramer said. “That would prove, without a doubt, that Kraft Heinz is a growth company with a forward-looking agenda.”

“Sometimes, companies need to be willing to totally reinvent themselves if they want to stay relevant or even just stay in the game,” he said. “You either bite the bullet and disrupt your whole industry or you get disrupted and … end up like roadkill.”

Disclosure: Cramer’s charitable trust owns shares of Apple, Facebook, Alphabet, PayPal, and Johnson & Johnson.

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