Jim Cramer shares his views every day on RealMoney. Click here for a real-time look at his insights and musings.
Cramer: Citigroup and Goldman Sachs Have Further to Run
Posted at 9:11 a.m. EDT on Friday, Nov. 25, 2016
I would contend nowhere near remarkable enough. Here's why. Right now, the stock of Goldman Sachs is at $212. But in June 2015 it was at $219.
Right now, Citi is at $56 but in July 2015 it was at $60.
Almost every other bank has taken out those highs from last year. Most are truly up, up, and away from back then.
Yet Goldman Sachs and Citigroup have a lot more going for them now than they did back then.
First, we are far closer to the multiple rate hike scenario now than we were when they took out these levels last. Both companies have tremendous leverage to the short rates, less than Bank of America (BAC) , JPMorgan (JPM) or Wells Fargo (WFC) , but totally additive to share.
Second, Goldman Sachs is often considered to be the biggest loser under Dodd Frank because it severely limited what it could and couldn't do with its capital. I have always thought that Goldman figures it out no matter what, it just takes some time to adjust. Now, it has not only figured it out, but it has cut costs dramatically just when revenues are going to increase and regulation is going to slow or be repealed.
Citi's always been a story of burning off bad legacy assets from the old days. Every day further from the Great Recession is a better day for Citi. The last quarter pretty much put what's left in the rearview mirror yet its stock is still below where it was.
Its tangible book value has increased by $7.0 billion since then, but its market cap has retreated by $8.0 billion--a $15 billion swing that makes no sense. Plus, its capital markets are much more active than they were a year ago.
So even though these stocks are thought to be rocket ships post the Trump election, I think they remain relatively cheap versus their competitors' stocks, with Citi poised to add eight points before it can even be considered remotely near the value of others in the group even as, frankly, it's better run than almost all of them.Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long C, WFC.
Cramer: You Can't Wait Until Everyone Loves a Stock to Buy It
Posted at 4:10 p.m. EDT on Tuesday, Nov. 22, 2016
That's so wrong it is a bit of rarity. What I am more concerned about are situations where people buy to hold and drive people out of stocks, and yet nothing's wrong.
We saw a host of those with the banking group last week.
But if you look at stocks like Freeport McMoRan (FCX) , which just keeps taking out new levels, and then you look at how analysts hate the darned thing so much it gets daunting.
I mean, wow, they had so many chances to recommend it and never did.
I know that Freeport's a tough nut to swallow in terms of an upgrade. The balance sheet is terrible. It made a miserable deal buying an oil company at the top. But once it had liquefied the balance sheet, the bear case just disappeared.
Did anyone bother to upgrade the big retailers into those quarters? You had to know the zeitgeist to get those right.
We saw this too with a stock like WhiteWave (WWAV) that was bought out by Danone, or NXP Semi (NXPI) bought by Qualcomm (QCOM) . It was torture to own these because the stocks were so unpopular with analysts. (Qualcomm is part of TheStreet's Dividend Stock Advisor portfolio.)
Take Arconic (ARNC) , the spinoff of Alcoa (AA) . I think this is a terrific aerospace and light-weighting story that, while it has a lot of debt, can pay down a lot when it sells its 18% stake in AA. It also is a big winner as rates go up because of pension issues. (NXP Semi and Arconic are part of TheStreet's Action Alerts PLUS portfolio.)
Most important, you are buying it when everyone hates it. There are six people who write about it and nobody wants to promote it. Yet I think it has a chance to be a big stock in 2017, which is why my charitable trust owns it and we have been buying down here at $19.
You have to buy it when people don't like it.
I know how hard that is. Yet that's been the story of this market. It takes up a lot of stocks if you are patient.
This will be especially important with the bank stocks going forward, where you can tell the analysts want out. Ahead of a rate hike or two or three with a president that is pro-bank, what is the issue here?
Better times for sale await.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long NXPI and ARNC.
Cramer: Trump Rally Is a FANG + FANG Affair
Posted at 4:15 p.m. EDT on Monday, Nov. 21, 2016
Yes. You know that there's Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Alphabet (GOOGL) , formerly known as Google. But what's the other FANG? That's a growth oil company, Diamondback Energy with the symbol (FANG) , that's rooted in the colossal Permian basin and is growing its production at 30%. With oil charging back up to $47 on word that Russia is willing to freeze production, integral to getting prices higher, this growth oil is about as exciting to the natural resources as FANG is to tech.
But let's back up a little and go over what's behind this phase of the Trump rally.
First, immediately upon Trump's unlikely victory, we had a visceral rally in the banks, because not only were they not going to be punished by a decidedly leftist Hillary Clinton, but they wouldn't be hectored by an empowered Elizabeth Warren, the Democratic Senator from Massachusetts who might have headed the Senate Banking Committee. What a nightmare that would have been.
Plus the whole anti-banking apparatus, backed by Dodd-Frank, stood with open arms for Hillary's minions to embrace and enforce.
Instead they got a president who vowed to dismantle Dodd-Frank, and while Democratic Sen. Charles Schumer from New York said this weekend he believed he can stop that dismantling, it's obvious that you simply can lightly enforce the law and the banks can make fortunes. No wonder they were at the vanguard of the post-victory rally, screaming 14% higher on average and still making headway.
We also saw the industrial stocks ramp on a belief that Trump's policies to spend a trillion dollars on infrastructure while cutting taxes would ignite growth, perhaps to as much as 4%, which is the number people are kicking around. That's put a huge bid under these stocks and led to endless buying, even on downgrades.
Then there's the drug stock rally. Hillary and her crowd seemed hell-bent on making the drug companies pay for various transgressions, including price gouging. I think that judging from the statements coming out of the Trump camp to date the drug companies aren't part of the agenda. So we have seen them soar. Some stocks, like Celgene (CELG) , act like they are about to get a takeover bid. Others, like Bristol-Myers Squibb (BMY) are being forgiven for missing key endpoints of big drugs. While still others, like Biogen (BIIB) and Eli Lilly (LLY) are being given the benefit of the doubt for a pipeline that includes a possible Alzheimer's cure.
All of these moves, though, were done on the back of the FANG stocks. I read multiple obituaries of these great growth companies as they became sources of funds, as the term of art goes, to be able to fuel the rally in the industrials, the banks and the drug stocks.
Well guess, guess what, FANG is back and it feels like this time there must be new money coming in to back up the move. Let's take them one at a time. First there is Facebook. This one has acted like a faceplant on the canvas since it reported a few weeks ago, plummeting from $133 before it reported down to $115 last week.
Then after the bell Friday it announced a $6 billion buyback. At the same time it announced that its chief accounting officer would be stepping down.
How negative were people on Facebook? I went to social media to check the damage and all I read, predictably, was that Facebook was out of ideas to grow so it bought back the stock and it did so conveniently to cover up for the chief accounting officer's departure, no doubt motivated by the metric scandal that over-counted potential eyeballs.
Now this is the kind of perverse absurdity that's become table stakes in the battle against growth stocks. Firstly, Facebook has so much money that it can afford to buy back all the stock it wants and if the company feels that the stock is cheap on 2018 earnings, which it most certainly is based on its growth rate and the estimates, why not take advantage of the discount. Secondly, the chief accounting officer is staying on until February to transition out in an orderly way. That doesn't sound all that scandalous to me. Finally, the metrics? Four out of 200 metrics are being internally questioned. Sure, the company did say, when it reported, that it wasn't going to junk up its sites with too many ads. However, the decline has been incredibly severe, so severe that buyers flew in to take advantage of the discount. It's up four.
Amazon? Here's a company with a stock that has fallen more than 15% from its high because it wants to invest more in its business. How can you not want to get in front of that before Black Friday when all you are going to hear is phenomenal numbers? It makes too much sense not to buy. That's how it tacks on 15 points.
Netflix had a terrific quarter if you recall. The stock ran to $127 before being brought down to $113 as a source of funds. I still can't believe that the stock is 10 points below that high. Others can't either or it wouldn't be rallying $2.31.
Alphabet, which is barely above a market multiple on 2016 earnings--it trades at the same price-to-earnings ratio as Clorox and is cheaper than Colgate--had the unfortunate incidence of doing nothing while its stock eroded. This one's a pure Peter paying Paul, a way to buy all the Illinois Tool Works (ITW) and Bank of America (BAC) anyone could ever ask for. It's nine-point rally tells me maybe Peter's finished paying Paul and the stock got too cheap while it was doing so.
Look, the selloff made sense if there was no new money coming in. But we have a host of sources showing that it's flooding in and when that money comes in it goes to the four FANG stocks and the overlooked and maligned Apple (AAPL) . I think these have room to run.
And how about the other FANG, Diamondback Energy? Not only does it have unbelievable growth ahead of it because of how much land it has in the Permian and how low its costs are, it also has something else: a president that favors them.
We know that President Obama did not want fossil fuels to prosper and is very anti-pipeline. He favors renewables while saying he accepts all sources of energy have to be used right now while we wean ourselves off fossil fuels.
Trump's not saying that. He's saying that he wants fossil fuel companies, even coal companies, to prosper. He wants to put an end to the blocking of pipelines that should be built. He wants to drill as much as possible. He isn't about to try to find new ways to frustrate the industry. At the same time there is an eternal belief that OPEC will find a way to get prices higher. Oh, and get this: FANG is a $7.8 billion company with, according to a recent Simmons & Company report, only 160 employees. A tech company could only wish for that headcount.
Now look, I am not trying to be cute here. The truth is that today's a day of mutual coexistence where high-growth tech and natural resources stocks are going higher without sending much lower at all. That's proof of more money coming in; it's proof of a better attitude toward the asset class known as stocks. It's proof that the Trump rally's still not over; it's just morphing into another form of bull.