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The economy is the key metric that counts on Wall Street, Jim Cramer told the viewers of his "Mad Money" TV show Tuesday.
He said that it appears Wall Street defies gravity unless investors know which metrics are the ones that matter.
Consider today's earnings announcements from
( FO). They should've been an easy call.
Bristol-Myers reported earnings that beat the estimates, with solid top-line growth, while Fortune Brands said it expects its first quarter to be "difficult" and cut its dividend from 42 cents a share to just 19 cents a share.
So why was Bristol-Myers down 89 cents, while Fortune Brands shot up $1.42? Cramer said it's easy when you know which metrics Wall Street is looking for. The economy, he said trumps everything, even earnings.
Cramer said a rising tide does not lift all boats. When the economy begins to recover, Wall Street only rewards those poised to capitalize on growth, while it discards the defensive stocks like Bristol-Myers.
Over the last 12 months, Bristol-Myers has a total return of -6%, while Fortune Brands has a total return of -42%. But since Wall Street cares only about the future, and not the past, the conclusion is that Fortune Brands has room to run, while Bristol-Myers will likely mark time.
Fortune Brands has upside, said Cramer, and that's why it's being rewarded.
Housing Bottom Nears
With housing "still the key to everything," Cramer spoke with Mori Hosseini, chairman and CEO of the privately held ICI Homes, to find out just how close a bottom in the housing market might be.
According to Hosseini, the price of their homes stopped declining in February, and the company is seeing a recovery similar to that seen in 2001 and 2005. In the first week of April, the company sold 80 new homes in Florida, where it operates, he said.
Hosseini said while things are still not good, the velocity of sales is picking up, despite skepticism from the media and even from within ICI Homes. He said the simple fact remains that it's cheaper to buy a home, than rent.
While stopping short of calling a housing bottom either this summer or fall, Hosseini said the bottom is definitely coming.
Off the Charts
In this segment, Cramer again went head to head with colleague Rick Bensignor over the chart of
, a stock which Cramer owns for his charitable trust,
Action Alerts PLUS, to see whether the technical analysis or the fundamentals are in charge of the stock's direction.
According to Bensignor, this is the wrong time to buy Yum! Brands. He said the stock is poised for a pullback, and the buyers are exhausted. The charts indicate resistance as the stock's old uptrend line and recent downtrend line from its highs are both signaling technical investors to stay away, he said.
The fundamentals tell a different story. Cramer called Yum! Brands the best house in an increasingly good neighborhood. Cramer said Yum! Brands is a winner with growth, growth and more growth. The company has a strong balance sheet, declining input costs, great exposure to China, and countless other factors pulling in it's favor.
Instead of a 5%-to-6% decline in operating income as expected, Yum Brands posted a 4.5% increase and reiterated its full-year guidance. Cramer said a small pullback may be in order since the stock has run up 57% from it's low's, but he reiterated a buy on the stock on any weakness.
Cramer told a viewer that
, along with
, are all buys at this point in the economic cycle, despite missed earnings and other negatives.
Cramer was bullish on
Enterprise Products Partners
He was bearish on
Blue Coat Systems
Kansas City Southern
Buffalo Wild Wings
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At the time of publication, Cramer was long Yum! Brands, Union Pacific.
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