- what's missing in this market; and
- three short ideas that just aren't playing out.
What's Missing in This Market Posted at 10:40 a.m. EDT on Friday, May 10 Now I know why I kept Merck ( MRK) and why I didn't give up on Johnson & Johnson ( JNJ). Because not every day is going to feature a huge commodity move, particularly when there is still tremendous commodity deflation. You simply can't get away from the need for good yield in an era of commodity inflation, and these stocks give it to you. Today is a day, by the way, where I realize what is really missing in this market: high-yielding bank stocks. There was a time when you would reach for a Bank of America ( BAC) because it yielded a safe 4% to 5%, or maybe even go for a lesser-quality bank and pick up a little extra. But we keep getting force fed into the same drugs and foods because despite the bountiful return from so many companies' bottom lines, it isn't like these companies can double their dividends routinely.
For example, I was acutely aware when I interviewed Clorox ( CLX) CEO Don Knauss (the man who told Carl Icahn, "If you leave us alone, we will get you there") that the company has a board meeting this month where the dividend will be raised. Let me ask you: If Clorox raises its dividend by 6% would it make a big difference to you? Not to me. But if we aren't getting any rate increases any time soon, it will certainly make a difference to the big fixed-income boys who have given themselves carte blanche to buy stocks to pick up yield, and Clorox is about as safe as it gets -- unless rates tick upward by a hair. That's why something that's 4% to 5% is so much better, and we just don't have enough of them. So, we circle back to the likes of Merck and GlaxoSmithKline ( GSK) and we feel better than having to be all in the oils or the minerals -- and play on knowing the cushion is only ever so slight and not growing fast enough. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long GSK, JNJ, MRK.
Three Short Ideas Just Aren't Playing Out Posted at 12:38 p.m. EDT on Thursday, May 9 The action in Tesla Motors ( TSLA), Green Mountain Coffee Roasters ( GMCR) and Barnes & Noble ( BKS) strikes at the core of the dichotomy in this market. These three stocks represent what I call "intellectual shorts," meaning that the intelligentsia in this market truly despises these stocks. Take Tesla. Here's an $8 billion company that is going to make 21,000 cars that many of the intelligentsia set thinks are worthless. The party line on Tesla is that Chairman and CEO Elon Musk is a blowhard who is not to be trusted. They don't believe that the company is actually profitable, as Musk claims it is. They don't believe the financing numbers. They don't believe the guarantees.
I am bombarded with notes from people urging me to knock Tesla. I have no idea how to value this stock. It is a cult stock involving a cult car, and Elon Musk says that 25% of the people who take a test drive buy it. If that is true, then the company can sell every car it makes from now until kingdom come as long as the quality is high. So the stock can keep percolating higher. Speaking of percolation, if you look at Green Mountain today, you can see what happens when the intelligentsia gets it right, but it doesn't matter one bit. The rap on Green Mountain was that sales are slowing for the Keurig coffee-making unit, and that, plus the competition from the likes of Nespresso, means that Green Mountain could be a terminal short. Of course, there were also whispers that Starbucks ( SBUX) was going to take aim at Green Mountain, and nobody can withstand an enemy like Starbucks. Instead, the two companies announced a five-year partnership that put an end to the notion that these two will be warring anytime soon. The deal also includes the possibility that Starbucks will sell Keurig machines, so there goes a principal leg of the negative thesis.