Sometimes, CNBC’s Jim Cramer finds it useful to compare two completely different companies to find out what works and what doesn’t in a given market environment.
So, on Friday, the “Mad Money” host looked into the stocks and businesses of luxury retail play Michael Kors and beer brewer Molson Coors to see which one would win out if they were stacked side by side.
“While both of these stocks got slammed last week, … they’ve had very different trajectories of late,” Cramer said.
Shares of Michael Kors peaked in 2014, then spent several years in free-fall as its growth abated. But in 2017, the apparel and accessory maker started to turn around and its stock reignited, running to over $60 a share.
Shares of Molson Coors, on the other hand, peaked in 2016 and have struggled to stem their subsequent decline. After the company’s most recent earnings report, the stock had its worst day in 13 years.
In short, “Michael Kors has been leaving Molson Coors in the dust,” Cramer said. “I’d hate to see what Thanksgiving looks like at the Coors household: ‘Molson, why can’t you be more like your brother Michael?'”
The “Mad Money” host explained that Michael Kors’ strength has come in part from a strengthening consumer, but also from the company’s Jimmy Choo acquisition and some favorable analyst coverage.
He argued that Molson Coors’ issues stem from a not-so-advantageous acquisition that came out of Anheuser-Busch InBev’s purchase of SABMiller, in which SABMiller had to sell its stake in MillerCoors, a joint venture with Molson Coors’, back to Molson.
“The MillerCoors acquisition … was very complicated and turned out to be very poorly timed, Cramer said. “Essentially, Molson Coors doubled down on the mass beer market just as consumers were increasingly turning to fancier craft beers and local breweries.”
Cramer added that Michael Kors and Molson Coors are separated — and inversely affected — by completely different secular trends.
“While Michael has been benefiting from the renaissance in the apparel space, Molson is getting crushed by the rise of marijuana,” he said. “That’s right. Get this: they’re actually being smoked by legalization.”
He pointed to a statistic that encapsulated the issue with the Colorado-based Molson Coors: in states that have legalized marijuana use, beer sales have fallen by an average of 15 percent.
So as Michael Kors rebounds and Molson Coors stagnates, Cramer warned investors to look closely when they see stocks that trade at similar multiples — Kors at 13 times 2018 earnings and Coors at roughly 12 times — because one could be a trap.
“When it comes to Kors versus Coors, go with the one that’s on the rebound — it’s a broken stock — not the one that’s still in free-fall,” he concluded. “Consumers are coming back to apparel, but they’re fleeing from the mass beer market in droves. That’s why I like Michael Kors going into its earnings report later this month, and I’ve got to tell you [to] stay the heck away from Molson Coors after seeing those hideous numbers just last week.”