TheStreet.com's Jim Cramer says the value creation at both companies is astonishing and not going away, despite the market trend. Every now and then days like yesterday happen. Days where it is so crazy, where the selling never ends and the buying never ends. Where the sellers just keep reloading and the buyer just keep buying.
Some of it seems like short-covering panic and some of it seems like sellers who can't take the pain anymore. As I watched Cabot Oil & Gas (NYSE: COG) (Cramer's Take) -- a very good company, a company that priced a gigantic piece of merchandise 30% higher a fortnight ago -- go down more than 10% today, I am astonished at the market's inefficiency.
When I see Nucor (NYSE: NUE) (Cramer's Take) decline 10% on a good quarter and conservative guidance, I marvel at how ridiculous things are. Sure, you can say if you look at a three-year chart, "This is the end of the bubble." But how about value? How about the fact that COG is making much more money than it ever has and is unlikely, given the big shift toward natural gas, ever to make as little money as it did a few years ago?
There is no more dumping of steel, and there are not a lot of Greenfield steel mills being built anywhere, certainly no more than there were when NUE was at $79 instead of $59, but that doesn't matter either.
Yes, the rate of increase may not be increasing as it should, but the value creation at both companies is astonishing and not going away.
The value destruction at a Bank of America (NYSE: BAC) (Cramer's Take) and a Comerica (NYSE: CMA) (Cramer's Take) isn't going away, either.
These are all just giant proxies for runaway sentiment, with the sentiment being run by the thousands of hedge funds that are operating on the market daily.
But let's play it out. Let's say the big run in oil is over. Let's say it retreats to $100 or even $80. Nucor's earnings could be huge. Let's say natural gas drops to $9. COG will make a gigantic amount of money.
Remember, the people selling oil might think the bubble is bursting, but the people who actually are users of oil, like Nucor, have had to raise price endlessly because of energy. If energy falls because the bubble has burst, it will not have to roll back the costs, but its demand will stay strong.
Won't Cabot get hit further? I don't know; when nat gas hit $9 last time before breaking down to $8 and then rallying, the stock was higher than it is now. Of course, you could say that that was $9 going to $13. I just look at it as plain nine and say, hey, at $9 the thing belongs higher.
This is a vicious, emotional market. Things that worked last week have wiped you out this week. Things that killed you last week made your year. But nobody is this good.
I think steel will stay strong, oil and gas will be fine and the banks are not so hot until housing stops depreciating. I would buy stocks accordingly and sell them equally accordingly.
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RELATED LINKS:
Crude Oil Prices Continue to Slide
Cramer: Oil's Headed to $110
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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 Cabot Oil & Gas.
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Reader Comments (Page 1 of 1)
7-18-2008 @ 9:44AM
Donna said...
My thoughts on the past few days are the icks are buying their naked shorts of bank stocks with money they're getting from selling their oil futures! I was not aware naked shorting was allowed (by anyone) & that knowledge is making me rethink investing in a "Las Vegas" stock market.