Four Plays for an 'Anti-Implosion Rally'
Should the Fed buy a vowel (u or e) and get a clue, the cheap, oversold, economically sensitive parts of the stock market will perform best. If they manage to fight inflation right up to the start of a recession, defensive names will outperform.
On the belief that they will execute their job description -- and help manage the economy to avoid disaster -- here are some of the stocks I like for the "anti-implosion rally."
Skechers (SKX Quote - Cramer on SKX - Stock Picks): At $20, this leading, rapidly growing footwear company trades for only 10 times earnings and has a $5-per-share cash horde.
Everyone knows SKX faces a challenging December quarter, but this story is entirely about 2008. The company has three major growth drivers for next year, even in a slow-growth environment for domestic consumers.
Its international business has been growing around 50% and is accelerating. Their Cali Gear product line, a Crocs imitation, has seen explosive ordering and sell-through from Skechers family channel/department-store customers.
In addition, the company's largest domestic footwear retailers all expect double-digit growth in SKX's footwear business in 2008. I would be very disappointed if the company didn't grow revenue 20%+ and earnings even more next year. The stock could soar if I have the fundamentals right.
Western Digital (WDC Quote - Cramer on WDC - Stock Picks): At $30, this leading disk-drive company trades for only eight times my $3.75 calendar 2008 estimate. The hard-drive industry has consolidated into a much friendlier, higher-growth industry, and Western Digital has been the leading growth company in that space, stealing the limelight from
Seagate (STX Quote - Cramer on STX - Stock Picks), which seems to have gotten a bit fat, dumb and happy lately.
As this more rational industry navigates the seasonally slower winter and spring quarters with strong growth and benign pricing, I expect a significant revaluation of the leading hard-drive stocks. Western Digital should handily surpass current estimates for the March and June quarters under my fundamentals scenario, and a multiple expansion to 12 to 13 times earnings would deliver a stock approaching $50.
Robert Marcin
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