NEW YORK (TheStreet) -- As downgrades begin to appear in the industrial sector, TheStreet's Jim Cramer and Stephanie Link, co-managers of the Action Alerts PLUS portfolio, say the rating changes are unwarranted.
More specifically, Link pointed out the multiple downgrades on Honeywell (HON), an AAP holding, and the broad downgrade on the industrial sector. She added they are currently overweight the sector.
Cramer was quick to suggest that discipline should not be confused with direction. In other words, just because a stock moves higher is not a reason in itself to downgrade it.
He added that Honeywell and Eaton (ETN), another AAP holding, have been making money by not hiring people and even firing some of its employees. However, when the sales do come back, the company's operating leverage will be amazing. It's counter-intuitive to downgrade shares now when 2014 could be the year when sales will come back strong.
Link suggested that many of the AAP holdings were comprised of stocks with "self-help" stories, such as restructuring. She added demand should be strong, particularly in the automotive and aerospace industries.
Cramer stressed that when companies make huge profits, they deserve high multiples in a bull market. "We're just getting the huge profits, and we're just now going to get the high multiples," he concluded.