NEW YORK (Real Money) -- Only two full weeks into 2014 quarter, and we are already tracing out the themes of the year -- themes upon which large bets are being placed as if they are done deals. This kind of thinking isn't unusual at the beginning of the year. In fact, it is kind of endemic, as we're seeing what has resonance and what doesn't.
Without further ado, here's what I am seeing, with the positives first and the negatives second.
1. It's another year when aerospace is ascendant. We know from Alcoa (AA), which can produce up to 3 million fasteners per plane, or from General Electric (GE), with its giant share of jet engines, that the backlog of planes is huge. Still, the central thesis is that the customers are healthy. A number of folks believe the sector could be near a peak in the cycle, but they are being forced to rethink their negativity thanks to those customers, which range from newly well-capitalized American carriers to an exceptional crop of Middle East orders. We're set to hear from United Technologies (UTX) Wednesday, we'll find out more at that point.
2. Nonresidential construction may be, at last, increasing in the country. This gigantic generator of jobs has been stillborn since the Great Recession. It can be considered the lone area of the economy that's been holding the U.S. back. Nonresidential construction needs everything from big financing -- great for banks -- to robust white-collar companies that are running out of space, to a definitive end to the glut of office towers that had been built in response to the early-2000s boom. We are getting this theme from a host of banks that have reported. United Technologies has a gigantic heating, ventilation and air conditioning business, as well as its Otis elevator segment. So, again, this company will be able to tell us much more and cinch the theme for 2014.
3. The end of the decline in personal computers. Lost in the shuffle of the widely perceived disappointment from Intel (INTC) was a reluctance to call the end of the personal-computer decline. But the business mix would put the lie to that pessimism, and it is entirely possible that the adoption of the current Windows iteration might be arresting the decline. It's interesting to see that Micron (MU) and Seagate (STX) actually advanced on Intel's report, and Western Digital (WDC) held in well. This is the thesis that is also buoying Hewlett-Packard (HPQ) and jibes with what a newly private, free-speaking Dell has been telling people behind the scenes.
4. More mergers and acquisitions than last year. Of course we now know that, other than a couple of very large deals -- noticeably in Berkshire Hathaway's (BRK.A) / (BRK.B) Heinz buyout and the Vodafone (VOD) - Verizon (VZ) Wireless deal -- that M&A was a bust last year. I know because I read The Street sister site The Deal every day, and it looked mighty thin. However, already we have a potential bidding war for Time Warner Cable TWC. We're also seeing a cross-border deal for Beam (BEAM), the maker of Jim Beam whiskey, in something that's reminiscent of when foreign companies wanted more exposure to a growing U.S. market. This theme is also one that would help Morgan Stanley (MS) and Goldman Sachs (GS), although only the latter firm seems to need it.
5. The troubles with the banks are now winding down, and being replaced by the rewarding focus on net interest margin. For two years during the mortgage boom, the bank stocks were duds. Analysts kept waiting for the far a rise in the more lucrative and less risky net interest margin, which is what banks make on your deposits. This was the quarter when it finally happened, and it is looking mighty joyous, particularly because of the rather remarkable increases in deposits. This, when added to a peak in prosecutions and mortgage putbacks, is a major reason why Bank of America (BAC) stock is showing such a peppy move -- one that I think is in its infancy.
6. The return of Europe to the fold of growth. So many companies that are based in the U.S. expanded rapidly across the pond during the period of European Union growth. The result was a huge drag on earnings during the European Great Recession, requiring dramatic cutbacks in labor forces. Now, as we are hearing from Alcoa, General Motors (GM), Ford (F) and General Electric, business has bottomed and is beginning to produce nascent year-over-year comparisons that could cause big earnings leverage. Just a little lift in sales after dramatic cutbacks in staff would produce that effect, and it is already being talked about as a chief reason to own the industrials during earnings season.
7. Spending for telco equipment, both domestic and in China, seems to be making a comeback. We have heard that in burgeoning orders for Ciena (CIEN) and F5 Networks (FFIV) , and we have seen it coveted in the activist grab on Juniper (JNPR), something I don't believe would be occurring if there hadn't been a change in the order rate. A merger between Sprint (S) and T-Mobile (TMUS) may be the only stumbling block to a floodgate of spending. Incidentally, following Sprint's deal with Softbank, the company has been spending that Japanese money like crazy in order to build out its national footprint, as CEO Dan Hesse had promised.
8. With the increasing natural gas glut in tow, we're seeing companies actually begin to capitalize off that glut as a creator of secondary chemical jobs. We are seeing the chemical companies get some lift as their feedstock stays low, and many are committing to Southeast projects. Unlike what you've read, this issue has been more fantasy than fact, but it might flip this year.
9. But the nat gas glut is behind two negative themes that have come to the fore in 2014. First, the glut stems from oil drilling. The amount of oil being produced continues to astound the skeptics, but it is also putting tremendous downward pressure on domestic oil prices -- and, therefore, on the independents that had been such stars for so long. Schlumberger's (SLB) otherwise outstanding quarter confirmed this trend, as North American drilling was one of the dark spots for the period.
The second negative: the disaster that is coal, as seen in the domestic consumption of the fuel, going by CSX's (CSX) numbers. It looks like another step down in the industry at the hands of an aggressive Environmental Protection Agency and cheap natural gas.
10. The bizarre and disappearing mall shopper. We've witnessed a plethora of retail shortfalls that seem almost permanent in nature due the shocking shift to Web shopping in the final days of Christmas, combined with the concomitant decline in shopping at the mall. (The former turned out to be a speed bump for UPS (UPS), and no more than that, because the secular trend toward online shopping accelerated, which is ultimately good for a more prepared UPS.) I believe we will hear about this negative secular trend again when Starbucks (SBUX) reports Wednesday.
These 10 themes can be the basis of much potential outperformance in 2014, and the crucial element is how quickly and methodically bets can be based on these themes before they become obvious to the naked eye as reporting season gets into high gear. Remember, only 10% of S&P 500 companies have announced their quarters to date. I believe you must invest in these themes now, lest they be borne out without you. Should that happen, it could cause you to fall behind for the rest of 2014.
These themes do not trump the longer-term themes I called out as multiyear investments in Get Rich Carefully. However, they are developing into potent forces in the action so far in this still very young year.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long GE, GM, MS, BAC and CIEN.
Editor's Note: This article was originally published at 7:26 a.m. EST on Real Money on Jan. 21.