Jim Cramer 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:
- four plays off Verizon's quarter;
- Murdoch's bid for Dow Jones;
- predicting Dow Jones' response to bid;
- five key ingredients of the rally; and
- drillers with more upside ahead.
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, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Four Plays Off Verizon's Quarter
Originally published on 4/30/2007 at 9:10 a.m.
: That's the way to play this
quarter, where spending is going to accelerate on optical businesses.
It's been ages since we had a spending cycle worth noting in telco (vs. the unbelievably strong aerospace cycle; witness
this morning). When we had the last one, it was fantastic for Ciena, JDSU, Alcatel, Lucent (pre-combination),
Corning signaled the strength last week, even though it seemed that people focused far more on LCD screens.
This morning, though, Verizon makes it very clear that spending's going to be huge for these businesses.
I don't want to overthink this. The stocks in this sector aren't expensive if Verizon is going to accelerate spending. Just check the upgrade this morning of Ciena by Weisel. It again signals that this is the moment.
Of these, JDSU is the most problematic. Its history of terrible execution could blunt the cycle. I have far more faith in Tellabs
which already had
its terrible quarter. I don't trust
at all after Patricia Russo got the nod to run the company, but this Verizon story this morning explains the strength after that miserable quarter.
Let me just add that I hate this group -- if only because if Verizon hiccups, you are dead. We aren't seeing this kind of spending from either
or, of course and much more significantly,
. But given that Verizon
reported, the window is open for some capital gains off this very big cycle.
Speaking of defense and aerospace, you have got to check out the
discussion of the
Boeing suppliers portfolio on
Stockpickr. I tell you, every day this site becomes a more value-added investing tool.
TheStreet.com holds a minority ownership interest in Stockpickr LLC and serves on its Member Committee. Jim Cramer is a director, co-founder and stockholder of TheStreet.com. At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
Murdoch's Patience May Be Rewarded
Originally published on 5/1/2007 at 11:56 a.m.
It's about time. Finally, Rupert Murdoch
makes the bid, a $60-a-share bid for
. About 10 years ago, Murdoch called me in and said he wanted to buy Dow Jones. He felt that franchise couldn't be independent much longer, and he wasn't going to let anyone buy it.
He wanted to know -- because I had bought a 4% stake to try to force changes -- whether he could approach board members and try to take the company over. The stock was in the low $40s then. I suggested he pay $73. (This is all in
Confessions of a Street Addict
, by the way.) I also reminded him that the family still controlled it, and they would never sell.
The stock has been a dog ever since. Mind you, this is more than 10 years ago! So the $60-a-share bid is a good opener. Of course, the initial reaction from the family may be a simple no, and they don't have to sell.
But given the incredible underperformance and the possibility of it being
, maybe this time it will happen.
This time, it is needed: With Dow Jones,
has a ready-made business team to give its business channel the talent and the data it needs. It comes on the heels of Dow Jones doing its Web thing, with Interactive and
going it alone.
Murdoch never got back to me about his bid 10 years ago.
Looks like his patience has been rewarded. The market was about half of where it is now, and the stock is down.
Cramer is a featured commentator at CNBC. At the time of publication, Cramer had no positions in the stocks mentioned.
Dow Jones Directors May Take the Bid
Originally published on 5/2/2007 at 11:59 a.m.
Am I the only guy who believes that Rupert Murdoch has a real chance here, with this bid on
? Right now the betting line is so against him as to make me feel that this is one of those
situations where there's no hope and where some board members led Brian Roberts astray -- notably George Mitchell, according to Jim Stewart's
, one of the best business books ever written.
Put aside that this is the first time that the Bancroft family has even been allowed to consider a bid, because the only Bancroft that mattered was the one man who wasn't an actual Bancroft: Roy Hammer, a lawyer who believed that no bid was right. As long as he was the gatekeeper it was futile to bid. The fact that he left a couple of years ago had to make Murdoch feel the time was right. The fact that the management that didn't favor a bid either -- Peter Kann also believed that no bid was right -- has retired matters, too.
As does the fact that any Bancroft who cares about a stock price -- and maybe some don't because they regard it as a charity that pays a dividend, or a university with some capital gains upside -- has to be unhappy with the negative trajectory of the stock.
But all of these miss the point. The main thing I want to focus on, the main thing that
commentator has ignored over and over, is that there is an
board of directors at Dow Jones. A real, breathing board of directors.
Consider these members:
John Brock, the president and CEO of Coca-Cola Enterprises , who has gotten serious about creating shareholder value after years of not being focused.
Lewis Campbell, chairman, president and CEO of Textron , who has been a remarkable creator of high shareholder returns.
Eduardo Castro-Wright, president and CEO of Wal-Mart Stores USA, is one of those guys who is uniquely focused on the underperformance of Wal-Mart's stock and I sure don't think there's any way he likes a bad stock price of a company he's on the board of.
Harvey Golub, chairman of Campbell Soup's board, one of those companies with family ownership that has never viewed it as an obstacle to performance. He also built American Express into a profitable juggernaut.
John M. Engler, president and CEO of the National Association of Manufacturers, a capitalist's capitalist.
Frank Newman, chairman emeritus of Bankers Trust and CEO of Shenzhen Development Bank, a man who was instrumental in agreeing to sell Bankers Trust even though the company had a history of being vicious about protecting its independence.
Paul Sagan, president and CEO of Akamai , one of the most shareholder-friendly tech companies.
Now, there are others who are question marks:
- Dieter von Holtzbrinck, chairman of the supervisory board of a German company, the board chairman;
- Peter McPherson, who is president of the National Association of State Universities, and the man who may be stewarding this board just like a state university -- not good for the bid; and
- John Barfield, chairman and president of the Bartech Group, a staffing firm.
Then there are the three Bancroft board members, who historically have fought bids. But Leslie Hill, viewed as the key Bancroft person on the board, told
The New Yorker's
Ken Auletta four years ago "never say never" about a bid. This Murdoch bid seems like the one bid you'd never say
To watch Jim Cramer's video about the drama at Dow Jones, click here.
Finally, there is Michael B. Elefante, the lawyer who represents the Bancroft trust. From the shareholder point of view, the best thing that can be said about him is that he is not Roy Hammer, his predecessor, who famously blocked
with the Bancrofts, and was the person that Rupert Murdoch was most concerned about when he called me to his office in 1996 to see if a bid was possible.
Why go through this exercise? Because the business people on this board were
brought on to rubber-stamp the Bancroft family's wishes. The old board, the one I confronted 10 years ago about Dow Jones' profitability when I had amassed 4% of the company, was a sinecure board. Don't believe me? Go ask MFP Investors' Michael Price, the legendary creator of value who was given the back of the hand by the old board.
This board is going to be
about being sued. These members are going to be
about why they are even on the board if they can't think about bringing out shareholder value. They are
on the board to protect the newsroom. They are on the board to assess whether Dow Jones can get to $60 on its own at some time in the future without the Murdoch bid. If they can't opine on the bid, they know they are a sham board, and these are
I believe that these board members are going to have to support this bid. I think they are going to pressure the Bancroft family -- which is
intransigent -- to take a higher deal or they will have to resign en masse and reveal the charade that is dual classes of stock. I also believe that they will be able to convince a couple of Bancrofts, and that will be enough to do the job.
The reason the board members are never considered is that the Bancrofts, who favor independence, have been very quick -- if you ask me, much too quick -- to say that Murdoch doesn't have the votes. I find such a conclusion suspect, along with how it's being fed to important people in the media.
Murdoch told me he would
offer to do a deal, would not embarrass the Bancrofts and put the company in play. He would only offer to buy when he had the support of the company itself. Otherwise, why didn't he bid $74 10 years ago when I suggested he do so?
Of course, I have not read a word about my meeting with him then, other than in
Confessions of a Street Addict
. I can only say that the meeting happened; the report is an honest one.
Murdoch's got it. This is not Comcast-Disney.
We just don't know it yet.
Why does the market go up like this? I continue to emphasize the scarcity of stock and the large sizes of the institutions that are trying to get their positions in. It will only get
when the buybacks come back, as they will after a few days. ... Good ideas just keep flowing from this
Stockpickr. James Altucher and I sat down the TheStreet.com TV to talk about one of them in particular: stock plays off the obesity epidemic.
Click here to view the portfolio on Stockpickr, and
click here to watch the video.
Stockpickr LLC is a wholly owned subsidiary of TheStreet.com and part of its network of Web properties. Jim Cramer is a director, co-founder and stockholder of TheStreet.com. At the time of publication, Cramer had no positions in any of the stocks mentioned in this post.
Five Key Ingredients of This Run
Originally published on 5/2/2007 at 1:30 p.m.
By any standard, it's time to recognize that we have a new and different kind of market here, one that is more reminiscent of the runs we had in the 1980s and the 1990s, nothing like we have had this century.
We are back in a world where stocks can double or triple and nobody's shocked or amazed. That's a throwback to the old days. It's a totally different mindset than what has occupied money managers since 2000. Growth is and will be paid for in reasonable terms.
So, it's about time we analyzed why this run
occur rather than just be mesmerized by it. Here are the key ingredients of this run:
This overall lack of belief comes in many forms, so it is worth plunging into it in multiple bullet points.
Macro analysts are skeptical, given that the U.S. data are so bad. Nobody could have predicted these robust earnings, so expectations were too low, and the high or low nature of expectations is behind every major move in the market. The simple fact is that almost everyone came in expecting a slowdown/down year, and they failed to take into account ROW (the rest of the world).
Micro analysts looked at housing and autos and figured there was no way that any industrial company could defy their gravitational pull. That was just plain wrong because it only had to do with the U.S.
The media contributed directly to this skepticism. The media have, after feeling disgraced by allegedly being so bullish at the peak, taken on the role of begrudging curmudgeons, simply unwilling to believe in anything good about business or stocks. They wrap themselves in prudence. As you know, I call them reckless for that view
2. Supply Shortage.
The hedge fund complex and the buybacks have created a true supply shortage. Hedge funds, by nature, are hedged. There are more hedge funds running more money than ever before. They can be found on the short side almost as often as they can be found on the long side. Meanwhile, there has been a massive reduction in stock by companies with lots of excess cash that don't need to finance. As I have said, they don't even need a stock market.
When these two combine, there is an explosive situation because the firms that buy stocks have way more money than they used to, and there is a true supply shortage. We are not issuing anywhere near as much stock as we are retiring. That's remarkable, and unlike any other period in the past 25 years that I know of.
We know that the acquirers and the private-equity companies are so voracious -- the latter chartered to buy and with enough firepower to buy 350 of the lowest-valued-by-capitalization
members -- that the idea the market can get wrecked here has to be taken off the table. That doesn't mean it can't be down; it does mean there is a trampoline effect.
We never used to see so many bears among the analysts. They were mostly shilling for i-banking. Now we have hundreds of stocks with sells on them. That can lead to dynamite: the way
was because analysts were recommending selling and hedge funds took them up -- all because of this 2006 pull-through of engines. They never took into account international sales. So you have multi-year moves squeezed into a very short period of time. Trading desks can't find the stocks that the big funds need to get full positions, so they go up endlessly.
5. Fed irrelevance.
We are trained to think that we can't have a big move in stocks without the Fed cutting. Companies are so sick of our anemic growth and the Fed's abetting of it that they have taken matters into their own hands and bought back stock regardless of the Fed and moved overseas to spite the Fed and our paltry growth. That's one of the reasons everyone is so in disbelief about the move.
Those are the main five reasons. I am curious to hear others. I am hopeful that after this piece runs, we can have an intelligent forum in
Stockpickr about these very issues.
The changes are huge, the skepticism still thick, and the prices are going higher.
Put simply, you cannot afford to short any big-cap in this country.
I can't believe that my beginning-of-the-year
targets are looking so tame and easy to obtain so early in the year.
At the time of publication, Cramer had no positions in the stocks mentioned.
Drillers Have More Upside Ahead
Originally published on 5/04/2007 at 11:51 a.m.
You can't keep these drillers down, and the reasons for the run vary from the shortage of oil for the international integrateds (just did a video with Keith Lieberthal on this very issue, watch for it on the site soon) to the turn in natural gas prices.
That's good news. There is a whole cohort of natural gas drillers that can move ever higher and there's an equal thrust to own the
(I would emphasize
, too, as a laggard, but the contempt it's showing for its shareholders vs., say,
can only be described as frightening.)
just now turning in the U.S. If Canada turns, I believe you could see the
Oil Service HOLDRs
easily breach its high of $168. When it does, the resistance will disappear and a remarkable re-valuation even from these levels will begin.
Simply put: There's a lot more ahead. I would remain a buyer of this very important group.
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my take on the
At the time of publication, Cramer was long Transocean and Halliburton.
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