TheStreet.com's Jim Cramer says that absent any catalyst beyond "cheap," the sector looks set to disappoint. When people say "tech" on TV, it is almost always followed with "cheap," or "low valuation." To which I say, "So what?" AMD (NYSE: AMD) (Cramer's Take) looked cheap until last night. Motorola (NYSE: MOT) (Cramer's Take) looked cheap and there turned out to be no there there. Cisco (NASDAQ: CSCO) (Cramer's Take) looks cheap but all I hear are earnings cuts. Dell (NASDAQ: DELL) (Cramer's Take) looks cheap, but who cares?
Lots of cheap out there.
Here's my question: where's the catalyst?
Shorts? Stronger growth in the second half? No, the only catalysts I look for in tech are product cycles, and other than Salesforce.com (NYSE: CRM) (Cramer's Take) (nice move there), Research in Motion (NASDAQ: RIMM) (Cramer's Take) and maybe Apple (NASDAQ: AAPL) (Cramer's Take), because we need a new phone there already, there are no new product cycles to speak of.
Layer on the fact that RIMM has a product cycle and had a great quarter and is below where it traded at its high after the quarter -- can you imagine where that would be if the market were to turn down -- and you can see that tech may be cheap for nobody knows how long.
When that happens, you get a chain reaction when the market turns bad. Suddenly you have Microsoft (NASDAQ: MSFT) (Cramer's Take) thinking about overpaying, at least that will be the scuttlebutt. You have Hewlett-Packard (NYSE: HPQ) (Cramer's Take) going down because AMD says things are weaker. You have Intel (NASDAQ: INTC) (Cramer's Take) going down because AMD's not going bankrupt. You have Freescale on the cover of Business Week making it clear that there won't be any deals from this sector any time soon. Next you will have Google (NASDAQ: GOOG) (Cramer's Take) head down on a slowing ad story from some other company.
That's what happens when you are in it only for valuation and there aren't any product cycles to stem the tide.
I have heard tech praised endlessly this year, and yet it has done nothing. I think it is about to do less than nothing right now. I think it is going down.
Sure, IBM (NYSE: IBM) (Cramer's Take) will keep hyping its stock, and I don't think HPQ is doing badly. How low can Texas Instruments (NYSE: TXN) (Cramer's Take) go, it is so long-term cheap. Nokia's (NYSE: NOK) (Cramer's Take) having a decent quarter. EMC's (NYSE: EMC) (Cramer's Take) quarter is OK, but it does have VMware (NYSE: VMW) (Cramer's Take), which, unfortunately, is not doing that well despite the hype.
But they can't exist in a vacuum. There's not enough here to warrant further rallying.
I want to be careful of this group. The negative pin action could be swift and there is no great secular trend, like food shortage or oil or ethanol or Chinese building to keep things rolling along.
Random musings: If Kerry Killinger stays on when TPG does the recap of Washington Mutual (NYSE: WM) (Cramer's Take), I would short the stock.
RELATED LINKS:
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 EMC.
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Reader Comments (Page 1 of 1)
4-08-2008 @ 8:53AM
me said...
Who cares if tech is cheap? You raved about MO & I've lost 72% since. I wonder if you ever considered selling MO after talking it up, & now consider buying tech after telling everyone to sell because tech's too cheap. Why the panic? I've lost enough with your panic. I hope you've done well.
4-08-2008 @ 9:21AM
Ryan said...
Time to buy Tech...
4-08-2008 @ 11:18AM
arthur s altman said...
canadian oil trust,i would like your input..some names you like or dislike. thank you
4-08-2008 @ 12:44PM
mike said...
Oh Jim you sad man. You've been going on with this same point for months yet tech has shot up soon after your no catalyst comments last month. Give up, you're wrong, why do you hold on to your bad advice even after you're proved wrong by the street time and time again. Here's the catalyst for tech, Jim Cramer says don't buy, therefore you should buy agressively. I'm a Cramer -contrarian. So much of what you say is off, don't even get me started on SGP and the long list of other bad calls you've made. If I listened to everything you said I'd be broke. How about last years bullet proof recession stocks episode of Mad Money. You were so wrong its hillarious. I keep a seperate pretend portfolio of these stocks just to remind myself not to listen to you. I only follow your advice when you pump a stock like FSLR because I know your moron viewers will follow your every word... right to the slaughter. Follow your own advice and leave the tips for the waiters.
p.s. I used to love you, now I can't stand to look at you.
4-08-2008 @ 4:06PM
Bobby. said...
Jim Cramer has been wrong most of the time, and I really don't see why he is allowed so much coverage TV, radio and online, he just has a big mouth. He is always way too late when recommending a stock when the stock has already appreciated big time and not much of upside left, and he is always way too late when suggesting a sale when already the stock had been hammered big time already, such as WM that he keeps on recommending every one to get out, but at these levels everybody already knows that WM is risky and they should stay away from, why didn’t he see that 6 or 8 months ago, like I said he is always way too late.
4-08-2008 @ 5:51PM
NewsVisual said...
Past service as a member of the Board of Directors for Washington Mutual Inc (NYSE:WM) by TPG CEO David Bonderman could have played a role in his decision to invest $7 billion in the financially strapped bank. WaMu has been hit very hard by the sub-prime mortgage crises. So this infusion of cash represents a bailout of sorts. Mr Bonderman will return to the WaMu board as a condition for the investment. Aside from his strong financial and personal commitment to the bank, Mr Bonderman will also be bringing a wealth of corporate experience that can be crucial as he advises on the bank on how to bring about its turnaround. Indeed, an IntellectSpace Knowledge Map shows that Mr Bonderman has a plethora of other corporate connections, including connections to Burger King Holdings Inc, J Crew Group Inc, and Seagate Technology LLC, to name a few.