The Name of the Game: Break the Hedge Fund

Now we are in total Break the Hedge Fund mode. Total. People are simply looking at holdings and using it as a barrel shoot -- as in, shooting fish in a barrel.

It is pretty amazing to watch, for example, the destruction of the holdings of a Millennium or an Atticus or ESL (Eddie Lampert's fund) or a Citadel or a Pershing. I hear people saying "Just short Target (TGT - commentary - Cramer's Take) and Borders (BGP - commentary - Cramer's Take), they can't stay up here 'cause Pershing needs the capital or it wouldn't have stopped fighting with Ceridian." The stocks these funds hold are simply getting crushed in what looks like an organized effort.

Unless a company has a buyback and the hedge funds are unlevered -- and leverage is typically the case in the growth and tech hedge funds -- the combination of debt and hedge fund is so toxic it is amazing.

Of course, many of the hedge funds above don't even use debt. But the shorts feel that if the stocks are broken, the fund of funds will pull out and we have a vicious circle.

I cannot disagree.

I have seen it happen to me.

I remain convinced that knowing the holders is a key part of this moment. The holders of an Intel (INTC - commentary - Cramer's Take) or a Cisco (CSCO - commentary - Cramer's Take) or a Texas Instruments (TXN - commentary - Cramer's Take) are not stressed. That's why those stocks are working, aside from seasonal concerns, and have good balance sheets and buybacks.

Analyze the holders before you pull the trigger.

(I am excluding P&G (PG - commentary - Cramer's Take)/Pepsi (PEP - commentary - Cramer's Take) kinds of names because they do well in a deflationary spiral, despite those who say that nothing can go up now. Is Procter not up? Is my screen wrong? Yes, it is that treacherous out there. That's how this works successfully. If a hedge fund or a mutual fund is fully invested it is very hard to defend.)

Now, here is what I say about all of this. If the hedge fund is unlevered and doing well, it will just get more money in.

At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.

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