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Drug stocks such as
Telecom technology names such as
From the proprietary semiconductor side,
Storage stocks such as
Software stocks like
From the wireless side,
On the phone side,
In conglomerates and growth,
High-growth energy stocks such as
And from the Web side,
OK, I know, I am exaggerating, but in that list is the repository of about $4 trillion in lost savings and bad ideas that have wracked portfolio managers' nights for as long as they flogged these stocks and hyped these stocks during the days. You still see portfolio managers coming on television and praising these very stocks and it makes you want to throw up, doesn't it? The other day, they flashed a couple of portfolio managers who love these stocks; they are down so huge that they will never get out alive. Read over that list, though. If you didn't own those stocks, you were history, just history. Now, you are history if you own them. The ideal portfolio now looks something like this: Defense
Homebuilders
Health care
Gambling
Home improvement
Regional banks with little or no brokerage
E-commerce
Again, there will be other names and portfolios, but that list pretty much defines what is working. Oh yeah, and General Motors (GM - commentary - Cramer's Take). What's interesting is that with the exception of a couple of those names, they are all medium-cap. There's an awful lot of money coming into those much smaller names. Yet, I will bet that many of them will become the EMCs, Sun Micros, Ciscos and Nortels of tomorrow. I know this because I just did a radio show about diversification and I can't believe how lacking in diversification most peoples' stocks and mutual funds are. I myself have worked like a banshee to get the investible names from that hot list into my own personal account Nevertheless, we have to imagine what it is like at most hedge funds and mutual funds and brokerage houses, which have all of these research and underwriting resources devoted to the first group of stocks and none to the latter. That's the true nightmare. That's the problem with so many funds and so many portfolios. That's why I continue to believe that the market will be choppy at best as the transition is made and why, even after the moves in, say, defense and housing, I don't think we are done. Ask yourself if your portfolio looks like the first list or the second one. If it is the first, I can predict more pain ahead for you. If it is the latter, you are in for more pleasure as 2002 unfolds.
Random musings: Flash -- I just signed up for Arne Alsin's Turnaround Letter. Arne has made so many people so much money, including many of my friends, that I think you have to read it. Arne's been on "America Now" on CNBC because he is one of the top stock pickers in the country. Join me in subscribing by clicking here.
James J. 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. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. At the time of publication, Cramer was long long Aetna, AOL Time Warner, Best Buy, Cisco, Commerce Bancorp, General Electric, HCA, L-3 Communications, Pfizer, Quest Diagnostics, Raytheon, Tyco, UnitedHealth Group and Wells Fargo.
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