A Plan for Biting Into FANG
Posted at 2:37 p.m. EDT on Friday, Nov. 20, 2015
FANG is insane. These stocks won't quit. Which leads me to point out that every year, right around now, we begin to see a pattern. Certain stocks almost never come in. We hate them because we don't own them. We have to bite the bullet and be disciplined.
We have to buy them on any weakness even if the weakness seems more than contrived.
So here's what I would so. The FANG stocks of Facebook (FB) - Get Report, Amazon (AMZN) - Get Report, Netflix (NFLX) - Get Report and Google, now Alphabet (GOOGL) - Get Report, are now so obviously anointed that you need exposure to all of them if you are a trader. (FB and GOOGL are both part of the Action Alerts PLUS portfolio.)
That means you have to find a deep-in-the-money strike that has appeal to you, preferably out a couple of months where you can sit and buy more when it goes lower.
When the stocks spike you sell some common stock against them, and then if the market comes in first you buy back the stock and then you buy more of the calls. If the stock falls enough, you can cover underneath the strike price and then play the bounce.
I know that this plan sounds frivolous. "Buy winners" doesn't take a rocket scientist.
But most people are going to say that they missed the move and forget about it.
I say buy the deeps. Go out a little. And keep trading them versus common on everyday basis but NEVER lose all of the exposure because in previous years they just kept rolling and I think that will be same this year, too.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB and GOOGL.
The Market Crushes the Bears Once Again
Posted at 11:06 a.m. EDT on Friday, Nov. 20, 2015
One week ago, one short week ago and this market looked like it was finally ready for the big roll over. The winners had been narrowed down to just a handful of stocks, notably FANG -- Action Alerts PLUS charity portfolio holding Facebook (FB) - Get Report, Growth Seeker portfolio's holding Amazon.com (AMZN) - Get Report, Netflix (NFLX) - Get Report and Google (GOOGL) - Get Report, now Alphabet -- and the paucity of strong stocks signaled the bull was on its last, tired legs. Terrible back to back numbers from Macy's (M) - Get Report and Nordstrom (JWN) - Get Report crushed the retail sector. A disappointing outlook from Cisco (CSCO) - Get Report put a damper on all of tech. Valeant's (VRX) continued decline crushed the drug valuations.
The consumer product companies were rolling over because the Fed was on the eve of raising, maybe multiple times, making their dividends seem paltry, indeed. Oil stocks were rolling over at breathtaking speed as crude plummeted back toward $40. The industrials were singed by a surprisingly strong dollar, with only Dividend Stock Advisor portfolio name General Electric (GE) - Get Report showing a pulse. Worse, as the market closed we learned of the terrible terrorist action unfolding in Paris.
A week later, and it's one of the most amazing transformations I have ever seen. Typically when breadth gets this narrow it is, indeed, a sign of limited love leading to a lowered level. Not this time. This week we saw a dramatic broadening of the stocks that went higher. Think about these positives. We found out when Home Depot (HD) - Get Report and Lowe's (LOW) - Get Report reported terrific numbers that the consumer was spending, she just wasn't spending at the mall. Both firms told a strong story of housing demand, which sent that cohort skyward.
Oil kept going lower, but the oil stocks diverged. Instead of General Electric being the sole industrial rallying, it got company from a diverse set of names, Emerson (EMR) - Get Report, Honeywell (HON) - Get Report, 3M (MMM) - Get Report.
Health care, instead of rolling over, was reborn, with both old pharma and biotech on the mend. It didn't hurt that Pfizer (PFE) - Get Report and Allergan (AGN) - Get Report frantically are trying to tie the knot. But companies like Biogen (BIIB) - Get Report and Lilly (LLY) - Get Report, which had been bruised badly, bounced back with alacrity.
Restaurant chains, one of many groups in a terrible bear market, came on strong, and this time it wasn't just McDonald's (MCD) - Get Report. Chipotle (CMG) - Get Report, one month after a bad quarter, showed some pep and Jack in the Box (JACK) - Get Report exploded higher on excellent guidance.
Apparel, which had been such a downer because of warm weather, jumped on a monster buyback from Nike (NKE) - Get Report, along with a big boost in the dividend and a stock split. The transports were suddenly e energized by a takeover outreach for down-and-out Norfolk Southern (NSC) - Get Report. Airgas (ARG) , the chemical company which famously balked at a $70 bid from Air Products (APD) - Get Report five years ago, got an offer from French rival Air Liquide that was simply too juicy to pass up, more than double the Air Products thwarted hostile offer.
Even the consumer products companies, with their 3% yields, did well once we heard from even the most hawkish Fed governors and presidents that one and wait has become the mantra, meaning the Fed isn't going to take up rates on autopilot even as December seems like lift-off. Oh, and FANG roared higher anyway, with support from none other than Apple (AAPL) - Get Report, which two big firms had recently pronounced as moribund for the duration, in still one more attempt to trade and not own Apple via channel checks that have often been more wrong than right.
Yep, it's been a remarkable week, one where we came in narrow and limping and went up wide and strong. The market, energized by everything from mergers to earnings to the Fed, crushed the bears just when it seemed like they had at last broken free and were ready to maul anything that moved.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB, GOOGL, CSCO, MMM, AGN, BIIB, LLY, JACK, AAPL.