Dot-com detritus is starting to trade. And that's how bottoms get formed.
Last Friday, we saw the beginning of a complicated process that has to occur if we're ever going to find a floor for the dot-coms.
It's called the clean-up, and it has been a long time in coming. A clean-up occurs when a big block of stock from a seller finally trades, and with it, comes the definitive lift in the stock.
Right now, there's a huge amount of supply in the dot-com world. There are giant blocks of stock that trading desks have been sitting on or that mutual funds have been trying to market. They haven't traded yet and as long as they haven't, you can't get a lift.
On Friday, we participated in a big clean-up print of one of the dot-coms. The company has been doing well, but its stock has hurt everyone who has owned it and never sold. The big block has been overhanging the stock for weeks. Once it traded though, the stock jumped 30%. Right after the trade.
That's going to be the norm now that we have so many broken dot-com stocks. Most of them have lids on them, big blocks held by people who
don't want to realize the loss
. Once these pieces trade, the stock is ready to lift.
We don't know which stocks in particular are close to cleaning up. But I have alerted my trading desk that I want to participate in any giant "prints," or large trades of the down-and-dirty dot-coms, because I think the majority of the ones that haven't disappeared yet may not. And I want in at these low prices.
Why bother? Pretty simple, once these pieces start trading and volume picks up, the owners of these companies are going to recognize that while the stocks can have a little lift -- 30% to 40% off the bottom -- we aren't going back to the old levels. That realism will make them come to terms with the one thing they have yet to face: the need to consolidate. Shortly, this consolidation wave is going to be upon us. That's worth being in on. So we're on the hunt for the ones that aren't about to run out of cash and that have good businesses that could be intriguing to others who want to become the next
That's where some big profits are going to be made.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long America Online 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