When Tech Gets Slammed, Don't Worry

The rotation out of tech and into Buffett-style stocks comes with the territory.
Author:
Publish date:

Take your eye off tech today. Watch

Procter

(PG) - Get Report

. Take a look at

Gillette

(G) - Get Report

. Focus on

Pfizer

(PFE) - Get Report

and

Coke

(KO) - Get Report

and

Pepsi

(PEP) - Get Report

. These stocks have taken a beating of late, and after a couple of days of tech turmoil, people start hiding out in these

Buffett

kind of names again.

Nah, they won't deliver you any performance. In fact, they will continue to bore the tears out of you. In fact, if you want to see some scary relative underperformance, graph

Berkshire Hathaway

(BRKA:NYSE) over

Dell

(DELL) - Get Report

or

Microsoft

(MSFT) - Get Report

and you will see what I mean.

But, after a couple of days of hammering, the crowd likes to go toward what passes as stability and you see money flowing into these stocks. Sometimes you have classic snapback rallies where the money goes right back into the

Ciscos

(CSCO) - Get Report

and the Dells. Usually, however, there is this interim step where these soporific cash generators step back into favor. It is an important tell for the stability of the market, because after a couple of days of outperformance from these fridge and medicine chest guys, it's back in the pool with the no-longer-super-heated techs.

This is a cycle that newbies might not be aware of. But think about it. Procter and Coke and

Bristol

(BMY) - Get Report

roared back in the fourth quarter behind mutual funds trying to get in something safe, and, of course, the constant indexing. I figure they could very well do the same thing now, as tech has lost some luster this week and last.

It's called rotation, and it is a common ill among traders and brokers both. I know I fell prey to it when I sold stocks. I would buy my clients

Cray

or a

DataGen

or

Tandem

when I was at

Goldman Sachs

, and then get the ^*&$*&$ kicked out of me by one of these selloffs. So I would switch back to hawking

Syntex

and

Squibb

and

Heinz

(HNZ)

because I didn't want my clients visiting my apartment at 72nd and 3rd with shotguns blazing.

In the weakness yesterday I found myself diverting precious money held for tech to

Bud

(BUD) - Get Report

because of some upside surprise news. Do I like Bud as much as Dell? No, but today, yeah, maybe, a little bit, certainly enough to buy it and flip it out up a couple of points.

Don't get discouraged when you see these stocks lifting while tech gets pummeled. Remember, it comes with the territory, and has been happening forever and ever.

Random musings:

Anybody who reads

Holly Hegeman's

column in

TheStreet.com

picked up a no-brainer four-point trade

on Wednesday . Holly writes about the airlines with a passion that I usually save for sports, and maybe

Intel

(INTC) - Get Report

,

AOL

(AOL)

and 'Soft. She knows everybody in that biz and has a great, great call on the airlines. I know when she sensed trouble from the group I bolted at levels I can't believe I got out of.

If you don't read her, you must not like making money. Or, you can find her takeover stuff cribbed in the

Journal

, worthless, the next day, after the stock opens up four. One copy of

Evelyn Waugh's

hilarious

Scoop

will now be sent by me personally to every reporter who steals from Holly or anybody else from

TheStreet.com

and then claims a scoop. Those who get a

Scoop

from me should only wish to be as professional as the character profiled in that hoot of a novel. CC'd of course, to your managing editor.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Intel, Microsoft, AOL, Anheuser-Busch, Dell and Cisco, although positions 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 by sending a letter to TheStreet.com.