Weak Hands Spoil the Brokerage Stocks

Deal or no deal? That's what is going on in the brokers. People bid up Bear Stearns (BSC - commentary - Cramer's Take) and Lehman (LEH - commentary - Cramer's Take) at the end of the week, thinking that perhaps we would see either equity infusions or perhaps outright takeovers. When we didn't, they sold off.

This is a new pattern born of the idea that there are many firms worldwide that are not hobbled that want in. I can't disagree -- these franchises are not expensive on book value, and there aren't that many of them.

The issue is, to me, how do you value them? I am sure this quarter is awful for all of them, thus explaining why they have such low multiples. I can't tell -- despite many requests otherwise on Stockpickr -- whether they have bottomed and how they will react to the quarters, because it's been a long time since "disappointing" wasn't simply beating the estimates by 10 to 15 cents minimum.

I think these stocks, without equity infusions, are going to trade at levels that make them less attractive than most other areas of the market. I would much rather be in a Wachovia (WB - commentary - Cramer's Take), where the yield is big and the bank is more likely to be a takeover target than a Bear or a Lehman.

I would much rather own a Wachovia than an ABN Amro (ABM - commentary - Cramer's Take), for certain. Marian Sandler's comment to the Wall Street Journal was very telling, that she would love to be in this game right now. Given that she built the most successful savings and loan of our lifetime with her husband, Golden West, this is quite an endorsement of the Wachovia model.

Either way, these stocks seem to be in the very worst hands. They go down on nothing, and they seem to have no support or champions other than from speculators.

In other words, I just don't see a lot here away from potential takeovers, and that's just not enough to intrigue me ... except for Fridays!

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

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