Cramer: Get Ready For a Tech Rally

[HenryTo]

Sorry, I don't agree with Cramer's take on INFY nor on WIT. I think the recent bullish trend of outsourcing is done for now - similar to what I've been saying during the last couple of months. I also don't think AAPL can last very long at these prices - i.e. I believe tech will continue to go down.
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Cramer's 'Mad Money': Get Ready For a Tech Rally
By TSC Staff
6/24/2005 7:29 PM EDT
URL: http://www.thestreet.com/funds/smarter_up/10229466.html

Updated from 7:05 p.m. EDT

Technology shares are poised to rally while oil and health care stocks are probably "done going down" after a two-day rally that lopped 2.7% off the Dow, Jim Cramer said on CNBC's "Mad Money" Friday night. Cramer warned against energy-reliant cyclical companies.

"The last two days, technology did better than cyclicals. That will be the pattern from here," Cramer said. "I switched my plan this week. I'm tired of making money in retail. It's time to take that money and put it in technology."

Cramer said too much optimism brought down the market this week as psychology got ahead of fundamentals.

"The market is getting killed because there's too many bulls. When everyone's so bullish, there's nobody left to convert," he said. "Everyone who wants to be in, is already in. The shorts were forced to cover earlier. They can't be the safety net that they could be earlier."

Still, the action in some sectors is better than others.

"We started seeing at the end of the week that companies that don't use a lot of oil were bottoming while companies that do [kept falling] ."

To harvest the coming upside, Cramer told viewers to "stop whining" about IT outsourcing and consider buying companies that can sell technology services cheaply, particularly ones based in India.

The business model works in a global economy because "wherever there are phone lines, you can outsource brainpower." Cramer prefers India to China because its information services infrastructure is already mature and the country doesn't have as many political headaches.

Cramer highlighted three names in the space, Cognizant (CTSH:Nasdaq) , Wipro (WIT:NYSE) and Infosys (INFY:Nasdaq) .

"Infosys is the pure play and it's the one I would run with," he said. He noted management problems have left Wipro cheapest on a price-to-earnings basis because of management trouble, and said Cognizant might be too levered to the financial sector.

"Infosys is cheaper. I still think Cognizant is going up, I just think Infosys is going up more," Cramer said. "That said, I'd buy either hand-over-fist on any kind of major pullback."

In pharmaceuticals, Cramer highlighted Genentech (DNA:NYSE) and Sanofi (SNY:NYSE ADR) as possible beneficiaries of new research showing chemotherapy is more effective in non-small cell lung cancer patients than previously believed.

While neither have obvious revenue streams in chemo, both have cancer candidates (Taxotere at Sanofi and Tarceva and Avastin at Genentech) that could see increased referrals in the event of more chemo treatments.

"When it comes to cancer, these drugs act like good little socialists. It's all about cooperation." Cramer said he'd "back up the truck" on Genentech.

Cramer was bearish on drug companies Alkermes (ALKS:Nasdaq) and Cephalon (CEPH:Nasdaq) , which recently signed a deal to market an anti-alcoholism treatment.

In the lightning round, Cramer was upbeat about Allstate (ALL:NYSE) , Medarex (MEDX:Nasdaq) , Kellwood (KWD:NYSE) , Sunrise Senior (SRZ:NYSE) , Boeing (BA:NYSE) , BE Aerospace (BEAV:Nasdaq) , Sonic (SONC:Nasdaq) , McGraw-Hill (MHP:NYSE) , McDonald's (MCD:NYSE) , Kaneb Pipeline (KPP:NYSE) , Whirlpool (WHP:NYSE) , Procter & Gamble (PG:NYSE) and ITT Industries (ITT:NYSE) .

He recommended selling Shanda (SNDA:Nasdaq) , Diebold (DBD:NYSE) , Salesforce (CRM:NYSE) , Nextel (NXTL:Nasdaq) , Amedisys (AMED:Nasdaq) , Red Robin (RRGB:Nasdaq) , Rockwell Collins (COL:NYSE) , Corn Products (CPO:NYSE) , Maytag (MYG:NYSE) , Ceradyne (CRDN:Nasdaq) , Able Labs (ABRX:Nasdaq) and Netflix (NFLX:Nasdaq) .


June 23 'Mad Money'

On CNBC's "Mad Money" Thursday, Jim Cramer said the market had a "first-class panic" Thursday, featuring a 166-plus point decline in the Dow Jones Industrial Average. "The market is throwing a sale and it's not discriminating between what needs oil lower and what doesn't," he said in the opening monologue. "Let's discriminate and get ready to do some buying."

In a Cramer-esque version of the paired trade, the television host laid out a number of stocks that "aren't working" and should be sold and recommended corresponding names that should be bought instead.

Cramer said the market "wants out" of stocks such as Tyco (TYC:NYSE) -- "which needs [fast] GDP growth we may not have anymore" -- and wants into UnitedHealth (UNH:NYSE) , which helps keep health care costs down.

"People should swap out of AMR (AMR:NYSE) and go into Halliburton (HAL:NYSE) ," he said.

"Get out of Ford (F:NYSE) and into Genentech (DNA:NYSE) ," he said, calling Ford above $10 "a gift."

"Sell Yellow Roadway (YELL:Nasdaq) -- it isn't coming back -- and buy Motorola (MOT:NYSE) ."

"Sell Southwest Airlines (LUV:NYSE) and buy Gillette (G:NYSE) ."

"Sell CSX (CSX:NYSE) and buy General Mills (GIS:NYSE) ."

"Sell Dow Chemical (DOW:NYSE) and buy Walgreen's (WAG:NYSE) ."

"Get out of DuPont (DD:NYSE) and into Bristol-Myers (BMY:NYSE) ."

"Bottom line -- people will sell tomorrow," Cramer predicted. "I need you to use the weakness that comes across the board and load 'em up if they're not sensitive to the economy or are in tech."

Cramer reiterated his bullish call on tech, calling it a "six-month call" vs. a daily call. "The market wants you in Microsoft (MSFT:Nasdaq) , which sells at 19 times earnings," he said. "If it does go down, it's a gift."

Later in the show, he observed relative and absolute strength Thursday in tech names such as Microsoft, Apple (AAPL:Nasdaq) , Broadcom (BRCM:Nasdaq) , and Google (GOOG:Nasdaq) . The group was "the rock of Gibraltar today ... that's a sign the buyers will come back to the Nasdaq first" after the oil-related selloff ends.

In response to a caller's question about how to profit from $60 oil, Cramer recommended ConocoPhillips (COP:NYSE) , EnCana (ECA:NYSE) and oil service companies Halliburton, Schlumberger (SLB:NYSE) , Baker Hughes (BHI:NYSE) and Smith International (SII:NYSE) . However, he later in the show recommended selling Chevron (CVX:NYSE) , fearing it'll have to "pay up" for Unocal (UCL:NYSE) .

In the Lightning Round, Cramer was upbeat about WellPoint (WLP:NYSE) , Quicksilver Resources (KWK:NYSE) , General Dynamics (GD:NYSE) , El Paso (EP:NYSE) , Millennium Pharmaceuticals (MLNM:Nasdaq) , Cimarex Energy (XEC:NYSE) and Disney (DIS:NYSE) .

The television host recommended selling Unova (UNA:NYSE) , Southern Peru Copper (PCU:NYSE) , IBM (IBM:NYSE) , Ameritrade (AMTD:Nasdaq) , Callaway Golf (ELY:NYSE) , Goodyear Tire (GT:NYSE) , Applied Digital Solutions (ADSX:Nasdaq) , Harris & Harris (TINY:Nasdaq) , International Securities Exchange (ISE:NYSE) , Manhattan Associates (MANH:NYSE) , and Kroger (KR:NYSE) .

Finally, Cramer agreed with Marketwatch.com columnist Herb Greenberg's negative stance on Jarden (JAH:NYSE) .

[HenryTo]

Great thread guys. Keep up the great work!

Henry

[Dubious]

Bill R.

Good post. You have good insight.

I enjoy your comments.

Have a great weekend.

[nodoodahs]

My memory, often flawed, had it before the ER. But remember, we're talking about a tech stock with PE well above 20 here, so I wouldn't have been paying too much attention anyway. Not my style of investment. If we were discussing a fertilizer company with a PE of 6 or so that was followed by only 1 analyst, I would probably know the details chapter and verse.

Not denying Cramer is a trend follower w/o discipline, actually have stated agreement with that earlier. Regardless of the extremely short term results for GOOG following his first mention, it did rise from the $220 neighborhood to about $295 over the next six weeks or so. Sometimes trend followers w/o discipline can make money. As they say in the country, "even a blind pig can find slop once in a while."

I think of all the picks mentioned in the Cramer post, I agreed with two. I own two he was bearish on in the post, and might pick up another after its 10% drop last week. So it should be obvious I'm not here to praise him for his stock analysis. But at the same time I'm not here to bury him, either. The two reasons I watch the show pretty much every day are (1) entertainment value and (2) insight into the mass psych of the wall street analyst. Since I've never been a professional in the investment business, I probably get more value out of item (2) than you do.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[Dubious]

It was AFTER the GOOG earnings report. Everyone that bought in the morning lost a quick $12. Remember in the after hours it was up 25. He said buy first thing in the morning. Next day it ended down 12.

He is a trend follower. If something is going up 25 in the after hours he is going to jump all over it so he can claim it as his claim to fame. IMHO.

Remember GERY. Google, Ebay, RIMM and Yahoo idea the start of January. Look at the charts. It was actually GERGY - I can not remember what the other stock was. I am thinking about it to hard at the moment.

I know Henry does not want to turn this into a bash Cramer board. So this will be my last post on this topic.

Take the red pill.

[nodoodahs]

The GOOG pick I'm talking about is right before last earnings report, I believe it was around $200 and he called $300. Of course, once it got rolling he started picking $310, etc. finally ending at a prediction of $350. We all know the story from there.I think it's fascinating that he was so negative about the IPO! I guess it's just another example of the "trend following" that he's known for.

I did enjoy listening to his rationalizations of the GOOG price target. I also spent some time on the Yahoo! boards looking at GOOG conversations and the evidence of mania was profound.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[Dubious]

When goog was a IPO he said it would never go above 100.

First pick on his new show was Morgan Stanley as a screaming buy. Want to start with a big bang out of the box. Just to bad this is such an obvious call - like playing t ball just hit the dang thing out of the park.

Within two weeks Morgan Stanley was imploding from within. Most ugly in the news battle since Disney last year.

[Dubious]

He did the same thing with Apple last year. Sell sell sell at 20 "going single digits" doubles and then it is a "screaming buy" at 40.

Same could be said for TASR and SIRI.

He gave Kerr McGee a screaming sell and it promptly went up 12 points in seven trading days.

Guess what??? I did the opposite .

I love the guy.

[HenryTo]

A little bit of history on Mr. Cramer:

Mr. Cramer on Google at this time last year - and now he is touting the company after a 200% appreciation in the stock price:

http://biz.yahoo.com/ts/040727/10174243_3.html

And following is a brief mention on an Alan Abelson's (Barron's ) article dated April 19, 2004:

WE'RE GRATEFUL FOR JAMES CRAMER. For whenever things look especially grim -- as they often do these days, colored by the dispatches from Iraq -- and we're pretty much at a loss for anything immediately at hand to provide a bit of cheer, we can depend on Mr. Cramer for comic relief. Mr. Cramer, as you're doubtless aware, is rather a ubiquitous presence in several special venues: Tout TV, for one, where he partners with Larry Kudlow, a made-for-television economist, doing financial shtick, and, for another, TheStreet.com, of which he's a proud founder and where he contributes a running stream of consciousness, agurgle with wild stock talk, untethered investment advice and spongy and soggy apercus.

Understand, if you will, that Mr. Cramer is not deliberately bent on lightening our mood or, so far as we know, anyone else's. But the absence of comedic intent doesn't in the slightest diminish our gratitude. All we know is that when we need it most, we can count on him to provide a chuckle.

What prompts this modest paean to Mr. Cramer was his earnest online urgings a fortnight or so ago that subscribers consider the merits of six stocks, disparate in almost every way except that they all exhibited dazzling speculative momentum. Or, as he nicely and concisely put it, "they go up," and do so with breathtaking persistence. Not to keep you in suspense, Cramer's sexy six are: WebEx, Netflix, Amedisys, Armor Holdings, XM Satellite Radio and Taser International.

Besides an enviable capacity for defying the laws of gravity and blessed with the power of perpetual levitation, Mr. Cramer's chosen enjoy an immunity to the pulls and tugs of everyday concerns that the thousands of ordinary stocks, poor things, are prey to. Or, as he asks rhetorically, "Do you think any of these six stocks is going to be held hostage by any employment number? By any ISM number? [For the uninitiated, ISM stands for Institute for Supply Management] By any set of numbers out there?" And then generously proceeds to answer his own rhetorical question: "No way."

The anointed half-dozen also share what Mr. Cramer plainly believes to be a great virtue -- they are not household names (except, obviously, in the Cramer household). Finally, what they have in common are valuations that, when they're not elevated, are absurd. Judge for yourself: WebEx is selling for five times this year's estimated sales and 35 times expected '04 earnings. Netflix is selling for 3.2 times projected sales and 62 times estimated earnings. Amedisys is going for 1.7 times this year's estimated sales and 22 times earnings. Armor Holdings, 1.41 times and 19.7 times, respectively, anticipated sales and earnings. XM Satellite Radio, 21 times sales; it lacks a P/E for the good and sufficient reason it's supposed to lose $3.27 a share this year. Last but not least, Taser International fetches 24 times sales and over 100 times estimated earnings.

We hasten to add the forecasts are not ours, but those of analysts or management. So it's not completely outside the realm of possibility that they could prove a tad too optimistic and that the valuations are commensurately understated.

Although Mr. Cramer exudes enthusiasm for all six, seasoned Street trooper that he is, he cautions, in the interest of prudence, against buying every one of them; instead, he prescribes "one or two" as part of a "discretionary portfolio," which he thoughtfully explains "as not meant for retirement but meant to augment income." A few sentences later, he ups the emotional ante by exhorting his starting-to-salivate readers to "embrace some of the untried and perhaps untrue as part of your portfolio during your search for ways to make big money in the market."

Alas, Mr. Cramer coyly refrains from advising big-money hunters specifically which one or two of those luscious prospective winners to set their sights on. Nor, alas again, does he proffer any guidance on how to tell the "untried" from the "untrue" for those of us cursed with an innate squeamishness that makes us reluctant to embrace, or even get acquainted with, the untrue. Nothing for it, we guess, but to make do with our own smell test and pray that our untutored noses are up to the job.

As a shamefully sporadic reader, and even less frequent viewer, of Mr. Cramer, we feel compelled to credit for rousing our interest in his stellar selection of untried and perhaps untrue picks an anonymous letter on money manager Bill Fleckenstein's Website that was kindly forwarded to us by someone named Fiscal Concern. Mr. Concern also directed attention to a speech Mr. Cramer gave in February 2000 on a similar group of stocks, entitled with characteristic restraint, "The Winners of the New World."

Mr. Cramer, apparently in a more expansive mood in those dewy days of early 2000, offered 10 stocks, rather than just six, that were sure-fire winners. They also were happily not household names and most were further blessed, as he told his presumably rapt audience, in that they "don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come." What a relief!

Here are the fabulous 10 stocks Mr. Cramer touted so grandly on Feb. 29, 2000, their price per share that day and where they are now: 724 Solutions, $1,882 a share then; around $4 a share today. Ariba, $132.25 then; $3 now. Digital Island, $116 then; acquired in September 2001 for $3.40 a share. Exodus Communications, $71.19 then; went belly-up in September 2001. InfoSpace, $1,085 a share then; $40 now. Inktomi, $137 then; acquired by Yahoo! in March 2003 for $1.65 a share. Mercury Interactive, $96 then; $45.50 today. Sonera, $55.80 then; acquired for about $6 a share in March 2003. Verisign, $253 then; $16 today. Veritas Software, $131 then; $27-plus now.

In retrospect, a more fitting description of Mr. Cramer's top 10 picks in February 2000, given their subsequent melancholy fate and the appreciable number that are no longer with us, rather than "The Winners of the New World" would have been, "The Winners of the Next World."

A BRIEF P.S. TO THE ABOVE. One of Mr. Cramer's super six picks -- Netflix -- after the close on Thursday reported a large loss for the first quarter and the stock immediately fell out of bed, tumbling on Friday from $37 or so to under $31.

The company, which rents DVDs via the Internet, blamed the higher cost of snaring subscribers and, by way of offset, announced it was boosting its fees. The hike in price for its offerings, incidentally, strikes us as problematic in light of the pending competition from the likes of Wal-Mart, Blockbuster, Amazon.com and cable outfits.

Earnings estimates for this year now seem reasonably suspect. As it is, Netflix's earnings are untaxed, so the 30 cents a share the company is projecting for all of 2004 is 20 cents, after taxes. Sticklers might insist that, fully taxed, the stock's P/E is really 150. But soft-hearted soul that we are, a 60 or whatever multiple is good enough for us (in fact, more than enough for us).

[nodoodahs]

Seriously! I love Cramer for the same reason I love the NBA - ENTERTAINMENT VALUE!

One of my favorite Cramer lines was from last decade ... he was on a panel discussing some tech stocks and he consistently referred to "amazon dot org" and about halfway through the panel someone got annoyed and corrected him. His response was classic: "they're amazon dot org because they're a non-profit. where are the profits?" That being said, he does lack discipline, is terribly inconsistent and a trend-follower.

I've learned a few things by watching him, mainly about mass psych and about the mind of the wall street manager. Convinces me even more about the short-term irrationality of the market LOL.

He was consistently long tech all the way through the bubble pop. He referred to Buffett in some pretty disparaging tones back then. He was big in Enron and a few others of that ilk, he was warned off by a short-seller friend (as he mentioned on the show last week). That comes from not doing fundamental analysis.

Flip side, he knows a lot about how some of the businesses work and I file away stuff to follow up on (and make my own decision). He did call Google's little spike right on the money, from the last earnings announce all the way to the margin at $300, and people who followed his advice early are looking good (I didn't - to me, stocks over PE 20 are like garlic to a vampire).

It's a fun show, as long as you read the disclaimer ...
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[Dubious]

He just started the diverification spill (has to please the masses) - that is the hot catch phrase right now.

He has no sell discipline and he is a trend follower.

Naz was at 2050 and he said "tech is dead". Naz goes to 2100 and he says "Go forth and buy" - buy buy buy.

Just giving you my HO. He has buried a lot of people in the past.

Just go to itulip.com and read some of his history.

But of course - you must decide for yourself.

[Gizmo]

The good advice he does give pertains to diversification. Now, as far as his Tech rally he may be right or not. If the Ndx outperforms the Dow on this decline it says get long.

In Oct. the Dow made a new low while the Ndx did not. We all know what happened in Nov/Dec.
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Gizmo

[Dubious]

[quote="pcoulter"]I've never really watched a whole show of Mad Money. Does anyone follow his advice, and if so, is he fairly accurate? I know he's a smart guy, but I just can't see someone getting good advice from CNBC.[/quote]

I retired in 2003 by doing the opposite of his advice. Example I shorted microstrategy from its high to to under $2 a share and he was long the whole time - the whole time. Take a look at the chart MSTR. Recent history. Wednesday he made the grand "Go forth and buy" anything tech. Look what has happened in the last two days. Not to be negative but this guy is a dream - if you go against what he is yelling about.

[Dubious]

[quote="Gizmo"]Looks like another AJC sell signal. LOL

AJC. Abby Joseph Cohen. In trader circles the joke is that when Abby comes out with a bullish forecast the market tanks within 3 days.[/quote]

That is why we call her Abby Joseph Conehead. If you chart her appearances on CNBS on a chart - she makes coneheads.

She is like money in the bank - if you short.

[pcoulter]

I've never really watched a whole show of Mad Money. Does anyone follow his advice, and if so, is he fairly accurate? I know he's a smart guy, but I just can't see someone getting good advice from CNBC.

[Gizmo]

Looking to make some low risk money by going long the Dow and short the Ndx (at 52% long 48% short). If a period of risk aversion is beginning the safer Dow stocks should outperform the riskier Techs. An alternate play would be long Spx and short Rut. A daily check of this chart is necessary to insure it remains in a downtrend.

http://www.ttrader.com/mycharts/display.php?p=34926&u=gizmo&a=Gizmo%27s%20Charts&id=1154
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Gizmo