NEW YORK (Real Money) -- You look at the charts. You study the fundamentals. And you get the same thing. Even on an up day like this one, the market's going to distinguish between stocks that get hurt by a Ukraine-Russia conflict and stocks that are unaffected by it. We are now well into discounting a protracted conflict on the Ukraine border without any sign of a diplomatic solution.
It's been a brutal period for some stocks and halcyon days for others. The S&P 500 keeps bumping into new highs because many of the U.S.-based international companies we had been banking on to produce multi-year growth, as they finally started getting revenue relief, are now rolling over and that money's pouring into domestic winners. It is true that many of the internationally-oriented stocks have rallied since the downing of flight MH-17, the benchmark of the international downturn, but they are stalling out and you need up days like today to trim them.
It's logical. The worldwide companies' estimates could now prove to be too high because of a combination of a recession in Europe and a too-strong U.S. dollar.
Before I get to what's working, let's just rule out what Europe's done for us. To do this we just need to go back to when Europe was first going awry back in 2012. We realized that tech, which has such a heavy emphasis on Europe, would not be able, en masse, to make it numbers. Now there are some special situations playing out here, notably the return of the PC to growth, which you can monitor with Hewlett-Packard (HPQ) , even it has a ton of Europe. And some of the cloud plays can still brag of plus 60% growth rate (see Splunk (SPLK) ). But I don't think the group will be able to transcend Europe when there are so many companies that do not have any Europe to choose from.
I wish Europe were, like in 2012, only causing problems for the industrials. No such luck. The European Central bank has so manipulated rates and the deflation is so powerful that the Italian 10-year trades at 2.4% and the Spanish 10-year clocks in at 2.2%. The German 10-year is a joke at below 1%. Anyone who knows how to handle a wire instruction is sending money here, so the 10-year Treasury is still offering way too much of a yield and the trade has been and remains to be lower not higher, rates. That aberration, given our job growth, seems always on the verge of correcting, but our budget deficit stands out vs. Germany's perfect balance sheet and demand from China, Europe and, yes, Russia, and will not let those rates lift.
Of course, that means continual buying of the dollar, too. That's why the banks and the big drug and consumer packaged goods companies don't really have much of a chance to have anything other than periodic flares higher.
I think these sectors are so problematic that they are going to stay under pressure and go down every single time we get a ratchet in tensions. That means pretty much daily. It's a huge issue and I think that the white flag has to be run up for the group as we have had to do for Action Alerts PLUS after fighting the tide for too long.
OK, so how about what's working? The ideal companies are a bit of a hodge-podge. Obamacare winners, restaurants and retailers that are viewed as being winners simply because they aren't in Europe and can be driven by job growth and lower gasoline costs, healthcare companies that save others money, entertainment, rails, supermarkets, liquor, employment-related companies, home-improvement plays, master limited partnerships, independent oils with terrific growth and a handful of special situations that should power higher maybe even into year end.
Twitter's turned the corner ever since CFO Anthony Noto got there to add discipline and ways to make money. GoPro's got an eco-system with the hottest product for the holiday season, which is already dawning on people after what was a great quarter, but brought in too much profit-taking. Tesla's just a really well-run stock and the negativists will not be able to take the pain going in to the end of the year and will most likely cover. Netflix is a worldwide sign-up bonanza and it just isn't going to stop given that it's not trapped by the need to show earnings per share. As more movies are added to streaming and more productions come on line the stock will just power higher.
Now retailers show you the Ukraine bias in action. The best performer's been Home Depot (HD) , which is a triumph of management. But Ross Stores (ROST) and Macy's (M) to me are the marvels. Ross was a great stock at one point and had ratcheted down its growth by leaps and bounds. Beating it has brought the stock back to life. Macy's? Clear miss and much higher -- what's not to like?
Everyone wants to call the bottom in Whole Foods (WFM) and a top in Kroger (KR) . I say I get the Whole Foods possibility: big, first-time national ad campaign coming, but, to me, the smart money's on Kroger. Restaurants: play high and low, like Chipotle (CMG) and Jack in the Box (JACK) with its Qdoba kicker. Enough already with Burger King, a second operator doesn't become first rate with an inversion deal with an extremely fattening concept. The world's turning on doughnuts faster than it is diet soda.
I see so much to like in healthcare that it's remarkable. Anything hospital -- anything, Tenet (THC) and HCA (HCA) are going to be go-to from here until year end. Other non-quitters: McKesson (MCK) , CVS (CVS) and Cigna (CIG) . All three merit attention. I also think that Perrigo (PRGO) and Mallinckrodt (MNK) have tremendous momentum, the first as we head into cold and flu season with easy compares and the latter with Questcor coming on line. The bears will be wrong there.
Regeneron (REGN) , Gilead (GILD) and Celgene (CELG) remain the best ways to play drugs as they are viewed as the ultimate Ukraine immune plays. I think it will take as long for this new Regeneron cholesterol drug to work its way into the numbers as it took Eylea, the macular degeneration drug, to be discounted. In other words, years.
High-growth oil and gas stocks, I think, are about to have another leg up as pipelines come on to get their stuff out of oil ghettos and into refineries at higher prices than they have been receiving. Usual winners here are EOG (EOG) , Anadarko (APC) , Cimarex (XEC) , Apache (APA) . It seems to me that oil's done going down and that's nothing but net for these companies.
Pipelines win. You want to roll the dice on takeout, go with MarkWest (MWE) and its terrific Marcellus pipes to the natural-gas-starved Northeast. Core holding: Kinder Morgan (KMI) . Ukraine's a win for these guys and it doesn't seem to matter at all that Russia could either shut down the tap to the West or flood the world with oil to prop up the ruble. I think that Russia's become so inscrutable that we can't factor it in. But the rest of the world's putting a demand bid, as well as a supply bid underneath the price and any sign that China's not falling off the grid again is good for oil.
Transports are getting murky and the ETFs can hammer the whole group, especially as air travel seems lighter with Ukraine concerns. But the rails can't even handle all the freight they have and I my money on either Union Pacific (UNP) for cars, sand and chemicals or Norfolk Southern (NSC) for the suddenly-hot coal export market.
Finally, we've got some special situations that call out for buyers. I like Automatic Data (ADP) as a continued play on return to employment growth. Waste Management (WM) could finally see some gains because of construction, which turned out to be the real reason to own the stock. I like Constellation Brands (STZ) and Monster (MNST) as the food and beverage plays. The former's been cooling, even as it just made a brilliant and little-noted tequila acquisition with Casa Noble. The short-timers are now out of Monster, as Coca-Cola (KO) now embarks on what I think will be a creeping tender offer.
Yep, the bets for the rest of 2014 are being placed. A politician-created recession for Europe that reverberates so it's back to the safety of our shores. To me, it looks like a 2012 redux and you have to switch your game plan on up days like today to preserve the gains that accrued pre-Sochi, which right now looks like the high-water mark of soft politics
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long KMI and TWTR.
Editor's Note: This article was originally published at 6:53 a.m. EDT on Real Money on Sept. 2.