TheStreet.com's Jim Cramer says companies with great earnings might be worth a look.
Stocks are cheap on an earnings basis -- unless they have earnings risk. If they have no earnings risk, they are not cheap.
Therein lies the conundrum on a day like today. Let's say you went CAMPing today: You bought Coke (NYSE: KO) (Cramer's Take), Altria (NYSE: MO) (Cramer's Take), Merck (NYSE: MER) (Cramer's Take) and Procter & Gamble (NYSE: PG) (Cramer's Take). Do you know that even after the precipitous falls last week and the declines we expect today, that none of them is historically cheap? Do you know that most of them are up significantly since last summer?
That's a real issue. You aren't buying them at rock bottom prices because they are up so much already.
Now, let's take the examples of the cyclical stocks in the Dow. They are cheap: United Tech (NYSE: UTX) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take), Alcoa (NYSE: AA) (Cramer's Take). But their earnings estimates are considered vulnerable to the worldwide slowdown and a U.S. recession.
You can chicken out, buy some Microsoft (NASDAQ: MSFT) (Cramer's Take), which has good earnings, or IBM (NYSE: IBM) (Cramer's Take), which just had great earnings, and in many ways those will be cheaper.
You could argue that Altria has a special situation in that it is splitting with a high dividend -- I believe you could make sense of the A in CAMPing that way.
I also believe that you could say that the dividend more than offsets the potential earnings weaknesses at Verizon (NYSE: VZ) (Cramer's Take) and AT&T (NYSE: T) (Cramer's Take).
All of those can be said.
But all of them can be said at lower prices, too.
My advice: If there are severe dislocations at the stocks that pay more than a 4% yield, you have something.
If the company just reported good numbers -- IBM -- you might have something.
Everything else, wait for a higher entry point to sell or a lower entry point to buy.
Random musings: One other safety check before you buy. Look at where a stock may have been last year at this time when we had more confidence in the global economy. If it is up big from a year ago, why not wait? ... I will be on the Today show today and then Squawk on the Street later in the morning.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Altria.
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Reader Comments (Page 1 of 1)
1-22-2008 @ 9:08AM
marilyn stafford said...
Last week, Jim, you encouragaed your viewers to buy MO...It was a slam-dunk.....Its down over 6 points from then.....Now what do you think?
1-22-2008 @ 10:29AM
larry christner said...
All of the good buys would be much better if the federal government would pay attention to the hedge funds and start to pass some regulations that would prevent what has happened. The lack of regulation of hedge funds whose investers buy on unregulated margins have created the problem we are in now. If no regulations are put into place the next event will be a world wide depression. Why has Cramer not talked about the hedge fund issues?
1-22-2008 @ 10:30AM
Max Kanaya said...
A look at the technicals though shows a big support for the DJIA at 12050. If the Dow slips below this level the next support is around 11642 and with today's Fed move that looks highly unlikely! The Fed has sent the markets a signal that it is serious on keeping the recession at bay.
Similarly Citigroup is nearly at a decade low and is worth a good look at current prices.
1-22-2008 @ 11:08AM
Karl said...
Trade technically and don't buy anything unless the technicals and fundamentals are on your side. The smart money has been short or in cash etc. Only buy when they are going up, or short when they are going down. If the FED contains this buy good stocks that pay good dividends as they are taxed at lower rates than the lousy interest on savings accounts. Plenty of nice ones, just keep your eyes open and wait to,be sure and get a good price. Buy real companies that make tons of cash at a good price when they are moving one way or the other. Cramer is OK most of the time but his bias is when the markets go up.
1-22-2008 @ 11:18AM
mary bonotto said...
fire Bush now.
1-23-2008 @ 8:33AM
John Murray said...
Pres. Bush is one of the best Presidents this
Country ever had.
1-22-2008 @ 11:38AM
Rh0153908 said...
Watch out for this guy, his lips move too fast.
1-22-2008 @ 11:54AM
ronandlane said...
Cramer...You are brilliant but I think you need to get a life. I don't trust you or any of your staff over at CNBC you are all too insulated from the real world and live in fairy land.
1-22-2008 @ 12:57PM
Peps said...
you are correct, say no more. Cramer is a joke.
What a coincidence that more than 95% of callers praise him for helping them make money... ????? If one believes that 95 % of his audience makes money then one might as well believe that the sun rises on the West. Absurd
1-22-2008 @ 11:58AM
ronandlane said...
I don't trust any bank at this point. They are the lowest form of bloodsuckers on earth next to the staff over at CNBC (OWNED BY GE).
This is all starting to make me sick to my stomach. Get a real job people and concentrate on work not the schlock market, which is manipulated and controlled by the lowest forms of humanity.
1-22-2008 @ 12:25PM
Richard Trabucco said...
IBM's Jan 17 & Jan 18 2008 SEC filings (Press Release) start with the following statements:
Press Release:
The following statement on Page 1: “Revenues were flat excluding the year-to-year impact of the Printing Systems Division divestiture in June 2007.”
Slides:
On Slide 3 (4Q 2007 Summary), the following information: “Revenue flat*”
and there's more!
My Comment - Considering revenue was flat for the 4th quarter (excluding printer div. divestiture), approx. 5% of revenue was attributable to currency exchange (not growth), and the Asian and European economies and markets are slowing and/or falling respectively, (which constitute 50% of IBM's business), it's hard to see how IBM can forecast such a rosy outlook for 2008.
1-22-2008 @ 1:07PM
Peps said...
Cramer obviously knows his stuff. However, the Mad Money show should be a comedy not a financial show. "Sears and the next Buffett," the stock went down and Big Oh Cramer encouraged not to sell, Sears went further down, more encouragement NOT TO SELL, "I am in the house of pain but I will not sell, meantime this fool listened to him--big bullsh t- ; "the market will be at 14500 at end of 2007" -another big BS.
Cramer and his lighting rod, he should know where he can stick it, in his rear end. Big boo yaah! sure.
1-22-2008 @ 7:29PM
AITAF said...
Shouldn't it be time to invest in junior mining stocks? With recession looming and gold/silver rising JR mining stocks that are currently undervalued historically boom.... right
1-23-2008 @ 2:52PM
FBERG said...
Is National Grid now a Buy , Sell or Hold stock??
1-31-2008 @ 9:26AM
Frank said...
If someone want's to kill my father.---Straght or snikily I'd kill him-bomed his country as hell. Nobady on earth would have blame Mr Bush. He is a fantastic personality! I love his face expretions. He is a real person with guds. I'd like to see in the oval office more like him. God blees him. He is a super grait felow.
2-04-2008 @ 7:56PM
k goff said...
Jim,
I truly believe that if you didn't go on the today show many months ago, like many others and tell the viewers not to buy homes, that we wouldn't be in as much of a mess as we are in today. All of you talking heads at this point don't know what to say. When I watched the Today show today I didn't hear a peep from you that you should buy or sell your stocks... Why not?
KGoff