"Most losers stay losers," Cramer told viewers, as he examined the dogs of the S&P 500 for 2010. Just because a stock has come down, said Cramer, doesn't make it cheap. While may big losers eventually snap back, bad companies are not worth owning at any price.
When Cramer last looked at the dogs of the S&P back in July, the results were incredibly positive. Cramer identified Nvidia (NVDA), Jabil Circuit (JBL) and Verizon (VZ), three stocks that are up 55%, 44% and 42% respectively.
But this year's dog are a different story, said Cramer. They include Dean Foods (DF), H&R Block (HRB), Apollo Group (APOL), Diamond Offshore (DO), Supervalu (SVU), Western Digital (WDC) and Pulte Homes (PHM).With each of these stocks declining between 24% and 55% over the past year, Cramer said investors may be tempted to buy into these stocks. But secular trends are working against each and every one, said Cramer, from Dean Foods, which is fighting overcapacity, to Diamond Offshore, which has the wrong type of drilling rigs, to Supervalu, which is struggling with its Albertson's acquisition. Cramer said in the oil patch, stocks like Schlumberger (SLB), or Action Alerts PLUS name Weatherford (WFT), would be better plays. Investors looking for housing exposure need to consider Bank of America, said Cramer. Of all of the dogs he examined, Cramer said he wouldn't be a buyer of any of them.
A Second LookSome dogs can be winners, said Cramer, as he uncovered three stocks that are worth a second look. Coming in third was memory chip maker Micron (MU), a stock that was down 24% last year. Cramer said this company is rapidly moving from old school DRAM memory into the hot new flash memory that goes into tablets and other mobile devices. He said at eight times earnings, Micron is a speculative way to play the continued growth of Apple (AAPL), an Action Alerts PLUS bellwether. Coming in second, steel maker AK Steel (AKS), who saw its shares slide 23% in 2010. Cramer said AK Steel is a cyclical play, and with aluminum and steel being late in the recovery cycle, AK may be in the sweet spot for 2011. He also liked AK for the possibility of a takeover. And the winner of Cramer's dogs of the S&P 500 contest is Southwestern Energy (SWN), a provider of natural gas that was down 22% in 2010. Cramer said Southwestern got crushed by falling natural gas prices, but with prices now stabilizing, Southwestern should recover. While the stock was down for 2010, the company has delivered a 2,600% gain over the past decade. "Don't count this one out," said Cramer.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV