NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- which troubled retailer is really kaput, and
- recent sector rotations.
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Which of These Cats Is Really Kaput?
Posted at 11:28 p.m. EST on Thursday, Feb. 27, 2014
Once owned a cat named Komag, named after a second-rate disc drive company during the heyday of personal computers. She was cute as can be, but it ended up bad for her as she got run over by a truck, and darned if there wasn't some hope for a second when her body bounced around the double yellow line.
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Yes, dead cats -- and I love cats and used to have seven of them -- do bounce.
Which brings me to Best Buy (BBY), Sears (SHLD - Get Report) and J.C. Penney (JCP - Get Report), because you have to ask yourself whether these are modern-day Komags or ones with nine lives that can come back from the coma.
Let's take them one at a time. The best of the prospects is Best Buy. Why? Because it was in comeback mode with new management before it got derailed by a couple of tough months of sales. Best Buy is what I call a broken stock, not a broken company, as the multiyear turn that includes shutting poorly-performing stores, improving service and increasing selection at prices that are often competitive to those of Amazon.com (AMZN) continues apace. The turn isn't pausing, the stock just got too high.
I like the long-term prospects because it is connected with housing and housing remains a strong tailwind for the industry as we found from a host of hard-good retailers earlier this week.
[Read: J.C. Penney Is Changing Course]
J.C. Penney's a tough call. The company looks like it has finally gotten through the trauma of the de-Johnsonification (that's the stripping of every single darned thing that Ron Johnson did to almost bankrupt the company). Returning CEO Mike Ullman has stabilized the operation and there seems to be enough money in the till to continue that stabilization. Here's the issue. In the end, J.C. Penney was, even in its best days, a so-so retailer under Ullman. Guess what? Now that all of that fancy stuff of Johnson's is gone and Ullman's returned the place to form, you just have a so-so retailer.
Can a so-so retailer triumph in a world where even well-capitalized outfits like Target (TGT) and Wal-Mart (WMT) are struggling, especially because Penney's life blood are private brands of no real renown and big markups followed by promotions? Who needs that? I say the stock can rally, the company's not dead, but we have so many quality retailers out there. Penney's is just a trade.
Now, let's talk about the most difficult one of all, Sears. We all went to Sears when we were younger around our town because it was reliable, solid and inexpensive. But it lost its way and ever since is merger with Kmart you really do have a merger of equals that are equally mediocre.
I know that Sears has done some remarkable things with its club strategy, but it is a second-rate Costco (COST) where there's only room for one Costco. It's tried to jazz up its stores with partnerships like those with Nicki Minaj and Adam Levine, but it is painful to even think that they might shop there, isn't it?
It's been slowly breaking itself up as we wait for a turn. But funny thing about the other companies in Sears' space: they have all turned. This one hasn't. Now it's telling us that it's going to sell Lands End to bring out even more value. Wait a second, Lands End is probably the best thing Sears has going. This company's selling winners to fund losers and that's a sucker's play when it comes to stocks and a sucker's play when it comes to retail. Of the three, this is the one that looks most like the cat that has at long last run out of lives.