This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Cramer: Buy the Banks and Chipmakers

Stocks in this article: METGSAVTCYBRCMAMDINTC

Please enjoy this free sample of our premium content featuring Jim Cramer. To get all of Cramer's premium content free for a limited time, please register here.

NEW YORK ( RealMoney) -- Two groups befuddle: semis and banks. I heard all day yesterday that neither group is doing well -- so why should it run? There's no denying the facts. They are awful. There is no revenue growth for the banks and there was a wave of missed quarters for the chips.

But there's a considerable short base in the banks that is paper-thin, and the semis have astonishingly low inventories, making it so a positive outlook on any growth -- or on any avoidance of collapse in Europe, a huge tech center -- can spur the group.

Cramer: It can't get any worse for the banks or the chipmakers, and that makes both beaten up sectors a buy.

How big is the short base? Some of what makes a good trade is that it has worked and worked and worked again. I can't emphasize how horrible the banks have been. With the exception of BB&T (BBT) and U.S. Bancorp (USB), I saw no real loan growth. They aren't allowed to raise their dividends or buy back stock in any large amounts. MetLife (MET), while not a bank, reported a huge quarter and yet the Fed specifically said no to higher dividends for the well-run company. We have stress tests upcoming, and who knows these days what the regulators have in store for them? Fee raises get flagged by the government as a reason to hate the banks or pull your money out of the fee-raisers. The huge debit card fees have been taken away. Who understands Dodd-Frank?

That said, there will be no banking collapse in Europe in the short term. The short-as-proxy play is over. The economy seems in some ways to be getting better. We keep hearing that non-residential housing is coming around, and that can be a source of loan growth. There are plans in the works to try to de-gum the housing crisis. Who knows if either will work, but after these huge short wins, why take chances? Plus, just in terms of pure bottom psychology, the real mover of things here -- can it really get worse for Goldman Sachs (GS) than being the lead story in the New York Times because of a gigantic loss? Goldman Sachs can make money every day from doing nothing. It might just do that for a spell and just not hire anyone new and let the attrition work its magic. Now that we know that the book seems really scrubbed, it makes sense, doesn't it?

Semis are a tougher call. I blanched when I saw the Avnet (AVT) quarter. But then I recalled that it could not have been any worse when Avnet bottomed last time, and maybe it is a little bit better. The inventories are too low to do the job. Novellus (NVLS), which had been very downbeat, gave you some real inventory hope on its call. So did Texas Instruments (TXN). Cypress Semiconductor (CY) truly said awful things, but how awful can it be with that huge dividend and monster buyback? Broadcom (BRCM) gave a terrible outlook but its core business is very strong. So is Qualcomm (QCOM), with big smartphone sales confirmed this morning by a rip-snorting quarter from Samsung just announced because of Galaxy sales.

Now along comes Advanced Micro Devices (AMD) after the close with a very solid forecast, and this roadkill could be resurrected. And let's not forget both Intel (INTC) and Arm Holdings (ARMH), which had both good earnings and a good outlook.

So, how about this: Future is brighter than past for semis because of inventory build and possible improving economy, and it is hard for the banks to get any worse. You add in the short base and the fact that people are looking for anything that is lagging the market so it can catch up now that the cyclicals have officially taken off, and your results? Banks and techs.

Buy 'em.

And that's just what people are doing.

At the time of publication, Cramer was long Broadcom and U.S. Bancorp

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs