NEW YORK (Real Money) -- 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:
- a rotation out of domestic into anything that is international but domestically based;
- and Shake Shack's room for growth.
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There's a Vicious Stock Market Rotation Happening
Posted at 10:49 a.m. EDT on Thursday, May 14, 2015
Could people be more out of position? This is a vicious rotation out of domestic -- anything domestic, rails, airlines, restaurants, retailers, you name it -- into anything that is international, but domestically based.
You can have companies that didn't even report gangbuster numbers, like IBM (IBM), move hard here because you could have a huge delta because of the weak dollar. The rotation also includes the financials because of a belief that a weak dollar allows the Fed to raise rates.
It is hard to sit here and watch a stock of a company like Target (TGT), which is a special situation, get brought down by the retail ETF to a level where you could put it away, but no one wants to do that.
Instead, they would rather buy Hewlett-Packard (HPQ), even as Citigroup says it might miss the quarter next week. This is a radical departure from just a few weeks ago where a miss in a tech was criminal. I wonder if it doesn't mean you can't circle back to Qualcomm (QCOM), even. That's radical.
Remember, ALL of the semis are heavily international and can, therefore, be bought.
Also, stocks like JPMorgan (JPM) -- a Doug Kass favorite -- can move, too. These moves are happening fast because the perception is now that at the end of the year we will start seeing numbers go up, not down, for these companies.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long TGT.
There's a Shake Shack Shortage
Posted at 7:31 a.m. EDT on Thursday, May 14, 2015
That's what imbued the entire Shake Shack (SHAK) conference call last night. There's so much runway here, so many places that want a Shake Shack, so much room for growth that you could see why the stock of this company, which has tripled since it came public, will be very hard to contain for the foreseeable future.
I write "contain" because clearly, with a short position of 42% of the float, this $2.4 billion market cap company might not abide by the short-sellers' wishes. You see, Shake Shack is like Netflix (NFLX) or Tesla (TSLA): there's a combination of incredible geographic opportunity and a total love of the concept and the product which means that you can't use the traditional metrics to measure the thing by. That makes SHAK a nightmare for someone who is shorting it using the prosaic rationale that "McDonald's (MCD) serves more hamburgers in a nanosecond than Shake Shack serves in a century."
Put simply: Shake Shack, the stock, is the kind of raw, brute force animal that overruns reason and logic very quickly, because right now there is a definitive Shake Shack shortage. There are 68 stores and the longs, including the Tesla-like longs, can see a need for 6800 before we would saturate the globe with Shake Shacks.
You see, the restaurant longs are a sated group. Most of their favorite chains are everywhere already, or are too cautious to move faster.
Shake Shack doesn't have to worry about moving fast. The company just opened in Chicago, Baltimore, Vegas and Boston. It isn't even in California yet. One fifth of the country has no shack!
It's got everything that these sated longs have been looking for: rising margins, an actual overseas expansion plan ALREADY, lower food costs ex beef, tremendous name recognition in part from the IPO, and an average of $2.8 million to $3.2 million in sales per average unit, the highest of any restaurant I follow.
In short, even though it only has 13 stores in its comparable sales base, even though it sees a definitive slowing from the 11.7% comp number it delivered, even though it expects cannibalization in the New York City area when its Madison Square Garden restaurant re-opens, this one's got wonderment, and wonderment per share is the magic elixir.
In the end it comes down to taste versus rationality. It is inconceivable that one chain with 68 restaurants can be worth $2.5 billion even if noted impresario Danny Meyer is chairman. But inconceivable has nothing to do with love for a product that produced "much stronger than expected same store sales growth" that allowed for two price increases in the last year, something that seemed to not matter one whit to its customers.
In short, Shake Shack is the antidote to McDonald's. There aren't enough of them and they can charge much, much more versus there being way too many of them.
I don't know if that makes it a great long, but one thing's for certain, until there is more float, this might replace Netflix and Tesla among the toughest shorts to maintain in the entire juicy menu of stocks worldwide.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.