Discipline and the Stocks Everyone Loves
So now
Red Hat
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joins
Redback
undefined
and
Juniper
(JNPR)
among Wall Street's most loved.
These are stocks that apparently make people insensitive to price. Investors just don't care about price issues with these guys. Periodically the market gets a bead on a couple of stocks and just doesn't let up. We saw it in
Remedy
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and
Clarify
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TheStreet Recommends
. We saw it in
Wellfleet
,
Synoptics
and
Cisco
(CSCO)
. We saw it with
UUNet
and
Spyglass
(SPYG)
. And, of course, we saw it with
Yahoo!
(YHOO)
,
Excite
and that mob.
Understand the force behind this: mutual fund love. Sometimes it knows no bounds. A couple of funds will buy these stocks every day with every marginal dollar. They will build positions in them and gun them. That's how some of these funds play. (I am not including
Copper Mountain
(CMTN)
and
Brocade
(BRCD)
, but don't email me. I see the mutual fund crush on those stocks, too.)
I like these companies, but I actually think about valuation. That's the worst mistake you can make in the short term, but it's quite logical in the long term.
Right now we're in the short term.
I am trying to modify my "mistake" by keeping small positions in these stocks and not getting shaken out by the 15- and 20-point up moves that happen for these. But talk about rough! The toughest thing in the world is to not blow out of an overvalued stock that is up 10.
That is the definition of discipline in this market.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Excite@Home, Juniper, Redback, Red Hat and Yahoo!. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at
jjcletters@thestreet.com.
