Spotting the Real Cyclicals
"Is Qwest (QWST) a cyclical because it is building out with the economy?"
"Why isn't
General Electric
(GE) - Get General Electric Company Report
moving? It is the biggest cyclical of all."
"Can't we buy the networkers as they help the cyclicals weather the storm?"
Wrong! Wrong! Wrong!
Don't ever try to shoehorn a growth stock into a cyclical. Never.
General Electric is the classic noncyclical. Its earnings did
not
get hit during the Asian and Brazilian fiascoes. Qwest is the quintessential growth company. It could get clobbered by this rotation. The networkers? Give me a break. I love these guys as much as anybody, but they don't cut it as cyclicals.
How do you spot a cyclical? It is a company that got clobbered by the depressions in Asia and Latin America. It is a company that has downsized dramatically in the past few years just to be able to stay in business. It is a company that admits it needs a world economy to be better to beat the Street's numbers.
Funds will try to claim they have some cyclicality because they own
AMD
(AMD) - Get Advanced Micro Devices Inc. Report
or
TheStreet Recommends
Cadence
(CDN)
or
National Semi
(NSM)
. But those are just poorly performing companies that seem to be doing badly with or without the economy.
Others will try to claim that
Bristol-Myers
(BMY) - Get Bristol-Myers Squibb Company Report
has cyclicality. Or even
Pfizer
(PFE) - Get Pfizer Inc. Report
.
To which I say, good luck. You'll need it.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in the stocks mentioned, although holdings can 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
letters@thestreet.com.
