This column was originally published on RealMoney on April 25 at 11:26 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
Where the heck is all of the supply? For six years stocks have meandered with sellers
above the current prices. That caused an endless chew-through that often could
How many times have you seen big upside surprises and gotten nothing special in the stock's price action, maybe a point up, and then two weeks later, the sellers would be back, motivated and blowing out of shares. This is the concept, if you have ever traded institutionally, of having heavy offerings that serve as a roof and then, in a few days, you get the sellers off the offering and hitting the bids.
Now, you have the opposite. Whether it's today's
Black & Decker
, or all-week stocks such as
, you have limited supply. That's how you get these gigantic one-day moves that are then
Earlier today I
opined that if you just willy-nilly buy back stock without a sense of cheapness, you waste shareholders' money. But if you have conviction, as
of the companies mentioned here have, you get a delicious combination of buybacks that
taken out excess supply and institutions that can't get in without paying up.
But let's add in something else, something truly amazing, an away team that gets blown out by these numbers. That's the hedge funds. They are providing the offerings
of many of these quarters -- check out Amazon -- and just borrowing that inventory, and have to buy it back much higher.
It's amazing to me, as someone who has had to ask for offerings to buy stocks when I wanted to buy them in size, how few firms will even offer stocks. They don't want to be in short supply. So the supply can't be found until you take stocks up 2, 3 or 4 points in a session, or even 10 points over a multiple days.
(Classic that when B&D went up $5 last week, it was from institutions furiously trying to build positions
shorts trying to cover. Not enough stock to go around, like Whirlpool.)
We saw these patterns with a lot of stocks during 1999 and 2000: tech stocks. They were heavily shorted and there was no supply. But before you make the analogy to them, let's remember that the supply did come out, in the form of secondaries. IPOs were artificially limited to get the stocks higher, and the earnings weren't there to generate enough cash to sop up the supply.
Now, I'm not even talking about the private-equity put that keeps a bid underneath stocks. Nor am I talking about the incredible merger movement, one that I think will accelerate as the dollar gets weaker. I also am not including the possibility that the
recognizes the weakness in America and flushes cash into the market through lower interest rates.
I am not addressing companies that want to create value by breaking up because they can't take the heat:
, to name a few.
Nor am I thinking about the activist hedge funds that force unlocked value on companies such as
and the aforementioned Temple-Inland.
Of course, all of these are driving this excellent market. The important thing to remember is that this is the
quarter we have had this combination.
came up with my aggressive target of 14,500 for the
at the end of 2006, I didn't even include a lot of these amazing factors. I now
begin to believe that I am being
conservative, but I will stick with it anyway given, distinctly happy if we beat it.
going to be
-- the old analogue -- or
, the new one, which is just a pure play on Halliburton's worst division. We do have 100 million-plus shares short and reduced expectations. The company has yet to buy back a share of its stock from the
deal. But we also have a management that has been totally incapable of bringing out any value to speak of. ... I read Black & Decker's power tool strength as being positive for
. Remember, it was
division that kept things back, not apparel. I know Sears makes Kenmore, which is really Whirlpool, and Whirlpool made it clear that it wasn't doing well domestically, but I remain convinced that Sears will do much better than
. ... I think the
breakup story is real and you will see $31-$32. ...
as I have said earlier. ... How maddeningly inconsistent is
? It's worse than
. ... These health maintenance companies, like
, have become toxic again, as opposed to the
of the world. ... U.S. beer for
looks like U.S. sodas for
. ... Could
be in talks with
? What else would explain those increases? ... How easy was that darned
? I think
, which reports on May 3, is the next big upside beat in health care. ...
the cheapest driller, even up here. ...
is resting before the next big move. ...
is fine. I would buy it.
At the time of publication, Cramer was long Halliburton, Sears Holdings, Transocean and Caterpillar.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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