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:
- The battlefront in the organic food aisle
- Why the ultra-caution about single-stock investing needs to be revisted
- The reasons talks between Dish Networks and T-Mobile CEOs very well might result in a merger
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.
Organic Aisle Has Become a Battlefield
Posted on June 2 at 2:01 p.m. EDT
People are itching to buy shares of Whole Foods (WFM) now that its stock has a $41 price tag, an 18% off sale for the year. They are asking about Sprouts Farmers Market (SFM - Get Report), the boutique version of Whole Foods with its small store and homey feel, that's down 10%.
Those who like to shop at some of the prettiest Fresh Market (TFM) stores and they can be dazzlers, are intrigued by scooping some of that one up, as it is now down 21% for the year.
And for all bottom-fishers in the natural and organic space, may I direct your attention to what Target (TGT - Get Report) CEO Brian Cornell emphasized last night on CNBC's "Mad Money," notably that the company wants to get bigger and bigger into "wellness." And he said he is just getting started in the expansion of the food aisle to include more natural and organic foods.
I say, Welcome to the most crowded area of the supermarkets and discounters these days because it is a double-digit growth category where you have low-single-digit to no-growth center-of-store merchandise at supermarkets and heavily discounted apparel and electronics at the big-boxers.
Sure, natural and organic sales are growing 11% and are said by some counts to be up to almost $40 billion in sales. So you could argue that there's room for all comers. You have to recognize, however, that you are playing with some chains that simply insist on winning the space, including Costco (COST - Get Report), which, at a $4 billion run rate in this category, is now neck and neck with Whole Foods.
That's quite a change from when managers of Costco admitted to me just a few years ago that they thought it was a fad that would go away. Now even Wal-Mart (WMT - Get Report) recognizes its importance -- and I say even Wal-Mart because this is a store where clerks sent me to the area for Rice Krispies bars when I was looking for rice cakes just five years ago.
It's not just these companies that want to dominate. Kroger's (KR - Get Report) Simple Truth natural-and-organic food line's doing $1 billion in sales and going higher. Who the heck knows how much business the private Trader Joe's is doing?
And Amazon's (AMZN - Get Report) got plenty of runway, too, with sales of so many natural and organic products that it's become a major driver of natural and organic king Hain Celestial (HAIN - Get Report) sales.
Into this breach comes Target's Cornell, and natural and organic has become integral to his world view of capturing millennials and nabbing young moms as part of a 360-degree attempt to start them at Target when they create their new households.
He can't afford to lose this battle and he can't afford to cede ground to anyone in the category, including the once most powerful force in the industry, Whole Foods.
Now I know from our interviews with co-CEO Walter Robb that Whole Foods isn't taking these challenges lightly. The founder of the movement is working on a new concept store that's meant to appeal directly to millennials.
The issue I have again, though, is that when there's this kind of price war, it's going to hurt the margins of all involved and it's easier for a Costco with its profits coming from membership cards to come in and dominate almost as a loss leader.
There is a shortage of natural and organic products in the country and that means higher prices to the consumer -- prices that Costco may not feel like passing on. It makes enough money on the cards that it can get away with keeping prices lower than everyone else. Hence its amazing sales numbers.
So I come out and say, be careful here with bottom-fishing in the narrow-focused natural and organic stocks. When you wade into the natural and organic aisle, you are wading into a battlefield with the newest combatant, Target, determined to win. And I do not want to doubt the resolve of a company playing catch-up in this most important category.
What's Wrong With Betting on One Stock?
Posted June 3, at 4:58 PM EDT
There's a lot of talk these days in the business about what's called "single-stock risk," meaning what happens if you buy the wrong stock for your portfolio, as in one that gets clobbered for whatever reason.
I think on a day when there's some very strong individual stock performance in an overall tranquil session, it's worth it to address the notion of the danger of single-stock risk, which has become all the rage among many stock professionals.
First, if you think I scoff at single-stock risk, you would be wrong. It is why I endlessly say your first $10,000 worth of saving must be index funds. I want you to be diversified and I want you to capture the progress of American industry through a fund that mimics the S&P 500.
I know many people don't have the time, the inclination or the analytical abilities to make decisions about individual stocks and I don't want them to. They should not be denied the exposure to stocks because of those handicaps. So an index fund is a very good proxy.
At the same time, though, I don't want the hobbyist, the home-gamer or those fascinated with stocks to be frustrated about the desire to learn about the market with an eye toward making decisions themselves about individual stocks.
I know there is luck involved in investing, and maybe you have the ill fortune to pick the wrong stocks.
But who am I to tell you that you are too stupid, ill-informed or easily defeated by the big boys with the short-term trading edge to pick an actual stock or two or more for yourselves after you have put the requisite money into that index fund?
I am not going to insult you with that nonsense. I listen to your calls and read your emails constantly and I often learn as much from you as you might from me. Knowledge is power in this business and most of you seem to have it.
In fact, I want to go one step further. I think there is an element of single-stock risk that I really abhor, and that's the shame of missing out on the performance of an individual stock because you are buffaloed into thinking it is too dangerous or too ignorant to do homework and decide if you like the company enough to own a piece of it.
The proselytizers of single-stock doom sometimes make out this whole business as too hard. Take this morning. I had the privilege to attend old friend and Yale School of Management professor Jeff Sonnenfeld's unbelievably enthralling chief executive leadership conference at the New York Stock Exchange. And while the contents of the confab are off the record, I couldn't help but look around the room and scoff at the notion of single-stock risk. Why?
Because in my line of sight a few feet away, I saw Steve Miller, a brilliant turnaround artist who is now on the Dow Chemical (DOW) board; Nick Pinchuk, CEO of Snap-on Tools (SNA); Tom Quinlan, CEO of R.R. Donnelley (RRD); Stuart Miller, CEO of homebuilding giant Lennar (LEN); and Ian Cook, CEO of Colgate (CL).
I can't say what they said (that's bound by the rules), but I can tell you what I said. I marveled that the love of index funds and sector funds is so great, as is the fear that the market is so totally rigged against the little guy that the public is missing out on owning a piece of the companies these CEOs lead.
The single-stock risk folks would have you believe that having a piece of Tom Quinlan's R.R. Donnelley is a big mistake, even as he is providing a 5.34% yield and has already rung up a 15.89% increase in the stock price since the year began. Quinlan's working like a dog to consolidate the print industry so you can profit from it. At the same time, he is branching out into all new kinds of printing.
Now, for much of the second half of my father's life, he owned Colgate stock. Why? Because he said everyone in the world has to or will have to brush their teeth. He often, for some unknown reason, would chant the jingle, "Brush your teeth with Colgate, Colgate dental cream."
So when I got to Goldman Sachs (GS) 32 years ago, I did the research and could see that Colgate was going from a domestic toothpaste company to a worldwide consumer-products powerhouse and that was worth participating in. How risky was it to own the single stock of one of the great companies of all time as it traveled from a buck thirty to $67.90?
Look, you could say that was hindsight, but for heaven's sake, it happened and you probably used one of its products during that magnificent run.
The depth of the Great Recession saw a huge decline in the homebuilding industry. Many homebuilders were annihilated. But not Lennar. What did CEO Stuart Miller do? How about take advantage of the homebuilding crash to pick up cheap land that will allow his company to shine for years and years.
When Dow Chemical welcomed Steve Miller, one of the great turnaround artists of all time, to the board of the company, I rejoiced. I owned it for my charitable trust and before that had owned AIG (AIG) during a period where it prospered under his chairmanship. It was one of the many successful turnaround roles in his career.
More single-stock risk? How about single-stock reward?
What can I say about Nick Pinchuk of Snap-On that I haven't in the many times he's been on CNBC's "Mad Money"? How about that the stock was at $41 when he became CEO and it's now at $156 eight years later?
How about that he has transformed the company into one of the great stealth technology-tool enterprises of this country? All you had to do was watch and listen and you could have had that one.
There were tons of CEOs at this eye-opening conference. I am only talking about the ones within sight. To me, that says the opportunities are as hidden as in Edgar Allan Poe's Purloined Letter.
Oh, and I wish the promoters of these endless ETFs would own up that a tech ETF would have obscured the gains of Apple (AAPL) or a drug ETF could have kept you from owning Regeneron (REGN) -- again, two stocks that I've flogged and told you not to trade but to own pretty much for the duration. (AAPL and DOW are part of my Action Alerts PLUS portfolio.)
To me, when you see what I saw at Sonnenfeld's conference today, you have to wonder whether perhaps the biggest worry about single-stock risk is missing the single stock that could make your year.
Heavy Smoke On T-Mobile, DISH Talk
Posted on June 4 at 4:09 p.m. EDT
How do you kill a rumor that makes so much sense? I am talking about the possible talks between T-Mobile's (TMUS) John Legere and Dish Network's (DISH) Charlie Ergen to create one giant uncarrier-untelevision company. The alleged discussions have both stocks roaring today.
The background: Last night The Wall Street Journal reported these two titans were talking about a combination. To be fair, this possibility has been chronicled endlessly by both David Faber and me through interviews with John Legere and Ergen, with whom Faber has a long-standing relationship.
The merged company would be a compelling entry. Dish has lots of spectrum that's needed for a big phone company and it obviously has the television feed. T-Mobile is the most aggressive carrier out there with the fastest growth but a critical spectrum shortage.
Legere is a rebel with a cause, aspiring to have having the best phone company on Earth. Ergen is a big thinker who has always tried to make Dish into a powerhouse. Both men are comfortable being in uber-deal mode. Neither man has ever denied that they like each other. Both have talked about the advantages of a combination in, admittedly, abstract terms.
The rally in T-Mobile and DISH stocks isn't the only evidence of something happening. There are ancillary signs that a merger might be imminent. The tower stocks, American Tower (AMT), SBA Communciations (SBAC) and Crown Castle (CCI) are roaring. They have been underperformers of late because the big carriers seem to have slowed spending.
But if the spectrum-rich Dish is paired with the spectrum-shy T-Mobile, there would be a need for all the tower space that could be obtained to do a nationwide build-out.
In the end, I think what the market is saying with this advance is there is an inevitability to the talks that makes them undeniable.
I tried to get John Legere on CNBC's "Squawk on the Street" this morning with a 4:20 a.m. invitation on Twitter. He shot back that it was his birthday and he had nothing to say but that if he were going to speak, it would be with us.
That was after he seemed disparage someone who asked, in a tweet, if the talks were for real. Legere's tweet, which I don't think was meant to throw cold water on the talks but was meant to tweak the tweeter, was later taken down. People are interpreting Legere's deletion as meaning the two principals are indeed talking about merging.
In a counter tweet I wished John a happy birthday and hoped he got a two-a-day exercycle workout. He often tweets of his love of spinning -- and that was that.
I wish it weren't, though. I happen to know that John was supposed to come to New York today and didn't, but that could be for any number of reasons.
What's most important here is that when you see two stocks go up on takeover talk in this environment and then not go down after the talks are basically characterized as a tad evergreen and not urgent, there tends to be fire with the smoke.
Think about all of the deals in the pharma and the food and the telco and cable spaces. The stocks involved in these deals invariably ran up ahead, exactly like T-Mobile and DISH shares are doing now.
That means to me that the leak is legit and if Ergen and Legere can come to terms, there will be a new colossal uncarrier dog with a television tail. Sure, they might not be able to agree on price and that could derail any deal. That was supposed to be the sticking point in a Microsoft (MSFT)-Salesforce.com (CRM) tie-up.
But if recent history is a guide, the smoke before the fire is thickening and I haven't seen this much smoke since immediately before the Charter Communications (CHTR)-Time Warner Cable (TWC) deal. And that deal was just as inevitable as this one seems to be right now.