Jim Cramer fills his blog on RealMoney 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:
- the banks' prognosis;
- the right nat-gas play; and
- a pernicious asymmetry in the media.
Don't Write Off Banks Just Yet
Posted at 10:45 a.m. EDT, Monday, Sept. 27 Banks trade horribly: no kidding. The charts are horrible -- thanks old friend Ralph Acampora for coming on "Mad Money" and showing us the negatives to the group. The headlines, like the one that dominates today's "Money and Investing" section of the Journal -- "Banks Keep Failing, No End in Sight" -- continue to be nauseating. The worries over earnings just don't stop, with last week's Jefferies ( JEF) quarter redefining bad, as Jefferies said trading was terrible, and trading is an integral part of much of the group's earnings. You can't get more negative than this endless parade of negativity. But think of the other business lines that Jefferies has. First there is merger-and-acquisition activity, which is running dramatically higher than it was last year. People are getting compensated big-time for Unilever ( UL)- Alberto Culver ( ACV - Get Report) and Southwest Airlines ( LUV - Get Report)- AirTran ( AAI), as well as all of these recent tech deals. Sure, M&A is up against easy compares. But it is extremely lucrative, of that there is no denying, and I don't think that the M&A that JPMorgan ( JPM - Get Report), Morgan Stanley ( MS - Get Report), Bank of America ( BAC - Get Report) or Goldman Sachs ( GS - Get Report) is doing is factored into the price. Second we have the biggest IPO week in three years. Doesn't that matter? Third, despite the endless drumbeat of housing's collapse, it isn't collapsing. The bad loans at this point tend to be concentrated in the collateralized debt obligation world, not the whole loan world, where the trends are definitively better. People refuse to recognize that there were two pipes in housing: whole loans kept by the banks, and sold loans issued by a lot of fly-by-nights and then bundled by the likes of Lehman and Bear. The latter are atrocious and really "out there" -- part shadow inventory, part worthless. But the whole loans are of better quality and can be more easily restructured. No matter, the point is that Jefferies lowered the bar for the group, but the group does not look like Jefferies at all. Could the group break out here? I don't think it can do so until we see the dividends returned. It is ridiculously out of favor. But remember that Jefferies is the most trading-oriented house other than Knight, so the lesson may have to be unlearned as we get closer to reporting period. At the time of publication, Cramer was long JPM and BAC.
NFG Is the Right Nat Gas Play
Posted at 10:19 a.m. EDT, Wednesday, Sept. 29 If you like the EQT Corp. ( EQT - Get Report) news of excellent Marcellus shale results -- and the market clearly does -- then you have to circle back to National Fuel Gas ( NFG - Get Report), which just last week hired a banker to bring out the value of its excellent Marcellus properties. The problem with all of the good finds of the public companies like EQT tends to be the inability to monetize the gas given the low prices and the crackdown against drilling that everyone sees coming. So why NFG? Doesn't it have the same problems? No, because it is not a one-trick pony. It has a regulated but terrific business away from Marcellus, and for those hungry for Marcellus properties -- tends to be the big majors -- it can sell huge stakes in its own properties or sell them all and still have that terrific prosaic utility business ... and some excellent California properties to boot. Why NFG over EQT? You get much, much more Marcellus acreage per share, and the whole company is valued at $4 billion, giving very little valuation to the actual utility, while EQT is $5 billion and isn't likely to sell the whole company. Remember, NFG has already hired a banker, Jefferies, to monetize Marcellus. You aren't going to get that with any of the pure public plays that we have seen so far, although some have been active selling stakes. If you get a Marcellus sale by NFG, it could be bigger than the entire company! In the meantime, if it does fall, you get a nice safe yield and a motivated management that feels compelled to take action to preserve value. So, if you want to buck the trend and buy nat gas companies, reach for NFG first, not EQT, as terrific as I believe EQT is. You avoid the "EPA risk" -- the broad rubric for the wearing down of producers by a very restrictive anti-nat-gas government -- and you minimize the exposure to the awful natural gas price, one that I think will stay awful as long as the drilling continues. At the time of publication, Cramer had no positions in the stocks mentioned.
I Guess It's Better to Be Negative Than Right
Posted at 3:19 p.m. EDT, Thursday, Sept. 30 Asymmetrical thinking. That's what my friend Tom Keene at Bloomberg calls the notion of how you're viewed as an excellent thinker and a helpful participant in the debate if you are negative about a stock or the market -- right or wrong. If you are positive and right about the stock and the market, it means very little. And if you are positive and WRONG about the market, then you are roundly criticized, often to the point that it ain't worth it. That's how bad the heat is. We have a classic example in the papers today. In yesterday's Journal a constantly saturnine writer, Kelly Evans, who writes a very important article on the left-hand corner of the "Money and Investing" section, penned a piece called "Weak Economy Saps Dollar Stores' Strength." In it there were a series of negative thoughts about Family Dollar ( FDO), which was due to report the very morning the article appeared. The incredibly cautionary article talked about how the "discount space is looking increasingly crowded," and there already may be too many stores. Then the article gets more negative: "More troubling, the squeeze on dollar stores' core lower-end shoppers is getting worse as unemployment continues to hover just below 10% and the economic rebound proves anemic." That macro backdrop, Evans writes, "is likely to put pressure on margins." More woes: "Bargain prices on food, drinks and other 'consumables' may get customers in the door, but discount retailers rely on higher-margin discretionary purchases for profit growth." We then get a cautionary note from a William Blair analyst Blair that says expiring jobless claims could hurt growth going forward, maybe by as much as 3 percentage points. The conclusion? "A weak economy mightn't turn out to be quite the gold mine for dollar stores that many investors seem to think." Five minutes after I read this article, Family Dollar reported and blew the numbers away. Let's just go through the cautionary comments laid out by Evans and what really happened. First, right to the headline: "Weak Economy Saps Dollar Stores' Strength". Just flat-out wrong. The weak economy continued to bolster FDO's strength as more and more people trade down to the store and the people who are already impoverished stick with it. The exact opposite of the piece's main thrust occurred. Now if the economy had gotten stronger there would be a chance for a trade-up. We didn't get that. The correlation with a weak economy, precisely what drives investors to these stocks, continued unabated, if not accelerated. Now, the contention of how "the discount space is looking increasingly crowded," was prima facie rebutted by a decision to expand more rapidly than in the past, putting up 300 stores in the new fiscal year. I had been expecting about half of that growth. Before you think they are being too aggressive, remember this is a decision being made by the always-prudent Howard Levine, the chairman and CEO, whom I know to be the most knowledgeable exec in this field. Believe me, if the segment were getting too crowded, he would keep growth plans the same or throttle them back. The segment, if anything, is under-stored. Another negative canard. Now how about the idea that "the squeeze on the core low-end shoppers is getting worse," with an anemic economic rebound and high unemployment issue? Again, it is exactly that "squeeze" that drove the sales higher than expected. Exactly that. A positive of FDO turned into negative by Evans. I don't get how that even gets in the paper.