NEW YORK (
fills his blog on
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:
- how "old" tech names are looking fresh; and
- why it's still too early to take profits and "go away."
for information on
, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Out With the Old, in With the New
Posted at 12:37 p.m. EDT on Friday, March 8
Exploited vs. unexploited. New names vs. old names. Overheated and overowned sectors vs. underowned sectors that haven't heated up yet.
That's where I think we are in this market. Money managers all over the country are looking at the stocks of companies hitting all-time highs and they are saying, "OK, what's still behind the averages longer term that I can make a thesis for buying?" They want to know where there still might be value. Right now they are finding little value in the consumer packaged goods sector of the market, think
( CLP), and a ton of value in the once-growth names in hardware and software, companies like
Now before you jump up and down for these names, because I tell you that the hot money is flowing into them, let me first tell you how the money management business works.
You know how when you got to the supermarket and you see something labeled "new" you might be more likely to try it than not, or at least that's what all of the brand people I have ever talked to tell me. It's not that much different in the money management business. There is an insatiable desire to hear new ideas and to take action on them, even if they seem old hat to you.
Take Texas Instruments. When I first got in this business Texas Instruments, along with National Semiconductor and Motorola were
highfliers. At that point many businesses that were mechanical in nature where going digital. Don't understand? Think about all of the electronic instruments that are in your car now, vs. what used to be in it. If you ever get a look at a late-model Ford or Chevy you will be in shock at how little instrumentation there really is. Now, cars are chock full of semiconductors. That revolution is what drove the tremendous growth spurt of what was then called high technology.
Now that transformation, which was so exciting back then, is the stock market equivalent of ancient history. Texas Instruments, which ended up buying
, is now considered a gross domestic product play, meaning if there is growth in the economy then its orders pick up. If there is no growth it languishes.
Last night Texas Instruments gave you an intraquarter update that showed you the company might be having a growth spurt. Orders are better. Inventories are lean. Things are getting better.
Of course, just like the stock market anticipated the better employment numbers this morning, Texas Instruments had anticipated the turn in orders so it didn't gallop as you might think it would. No matter, Texas Instruments is getting talked about by fund managers who haven't looked at it in ages, and I suspect it will be charging higher soon, breaking out of this long-constraining range, because if things are indeed getting better then the earnings estimates are probably too low. In the interim it has raised the dividend to the point where it yields 3.20%, a nice cushion if it gets hit while you are waiting.
It's the same thing with the telecommunications companies. We are seeing signs of life in JDSU, in Ciena and
, as companies that haven't spent a lot of technology of late, such as the giant telecommunications providers are at last spending again. They are making sense, too.
In the meantime old software plays, chiefly companies that provide information technology help, like Computer Sciences or Compuware or BMC, are coming back to life as new and inexpensive speculations that have, like Texas Instruments, hope because companies are feeling more confident about spending.
It's out with the old and in with the new, and the new, in this case, is overlooked, unloved technology from yesteryear. It's beginning to work, and I suspect it stays working as long as the stocks don't go so high that they are no longer considered cheap any more.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long CSCO.
Don't 'Go Away' Too Early
Posted at 6:41 p.m. EDT on Thursday, March 7
Heard it today for the first time: "We've been here before, we've been up a lot and then given it all back come May."
To which I say, sure, but the key isn't to fear May, it is to make as much money as you can by the end of the first quarter so you can take something off the table of sizable proportions before we enter a period that truly has been a subpar moment for the market.
I discussed this issue with Stephanie Link today after "Mad Money at the Half" -- a show that has been electrifying, I might add -- and how those who are selling now because they fear May, selling in March and going away, so to speak, might end up missing the performance they need to make before they go into hibernation.
I have always been fascinated in the concept of when to start caring about performance and when not to. Karen Cramer taught me that you shouldn't even look at your run on the first quarter, you had to try to shoot the lights out, knowing that if you failed, you have the whole rest of year to make it back.
I always have to ask what planet so many of the managers I listen to and read are from. How little do they really know about the business of performance? Don't they know that you have to take more risk at the beginning of the year -- meaning that if you are bullish, you have to go for some beta? How can they be so conservative? Are they just willing to tell their investors, "Hey, I didn't believe it"? Or, "Look, it was all the
, so I couldn't trust it"?
Boy, my investors never gave a damn about my excuses. They wanted performance no matter what. That's what so confuses me. Some of these managers already have to hope for a huge selloff to catch up with the averages, and most seem ill-prepared to even buy on an individual stock dip. You almost never hear someone say, "I said I was waiting for a drop in
, now I got it and it checks out, so I am a buyer." No, the stuff that gets dipped is the stuff they don't want. They are really hoping for a market-wide selloff, and then when we get that, they will hate stocks for whatever caused the selloff!
I think the time to take risk is when you still have time to make up for the damage.
The time is still now. If you really shoot the lights out, you can take the spring off! If you don't, then you better hope everyone does sell in May, because otherwise it just might be too hard to catch up.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in stocks mentioned.