Seeking Alpha
Profile| Send Message|
( followers)  

It is extremely rare that I have ever disagreed with Jim Cramer. You will be hard pressed to find another person with a better track record for assessing equity values than he. However, upon reading his recent picks, I have had no choice but oppose what I feel will prove to be selections that will yield (at best) sub par results going in 2012.

Name

Call

Date

Oracle Corporation (NYSE:ORCL)

Sell

12/20/2011

Apple Inc. (NASDAQ:AAPL)

Buy

12/16/2011

Google Inc. (NASDAQ:GOOG)

Buy

12/22/2011

Activision Blizzard, Inc (NASDAQ:ATVI)

Sell

12/16/2011

Texas Instruments Incorporated (NASDAQ:TXN)

Sell

12/19/2011

E*TRADE Financial Corporation (NASDAQ:ETFC)

Sell

12/15/2011

Oracle

While Cramer tends to be more partial to high growth equities that not only pay good dividends, but also those with excellent product pipelines, he also tends to overreact to hiccups. In other words, he rarely (if ever) forgives earnings misses. On that note he recently recommended Oracle as a sell on account of its disappointing results. It appears Wall Street agrees with Cramer because the stock has taken a severe beating as a consequence and has forced many to look at the company slightly differently. But is it warranted since it is the first time the company has missed in 10 years?

In the quarter ending November 30, the company reported a profit of 54 cents per share while analysts were projecting profits of 57 cents. The bright side of the report was that new software sales rose slightly - 2% year-over-year to $2 billion. Management also added that it expects hard revenue declines of 5% and 15% while also projecting new software sales growth of flat to 10% – another disappointment as analysts were forecasting growth of 7%.

I think what Cramer and Wall Street is overlooking is the fact Oracle has anticipated weakness in certain segments of its business and have positioned itself for the technological shift within the cloud that will allow it to maintain its dominance in the corporate enterprise sector. We have seen recent evidence of this strategy when it acquired RightNow, the cloud-based customer experience suite designed to help organizations deliver customer experiences across the web and social networks.

The bullish case for Oracle is simple – businesses want and need to grow and as they do, they will get more complicated. Oracle's expertise is in managing these complications and bringing efficiency to the enterprise. Indeed its results were disappointing, but one has to wonder that when IT expenditures return, so will its numbers.

Apple and Google

As always the case, as soon as a bellwether such as Oracle disappoints, the logical question is always whose next? To make money in the market, anticipation and predictability come at a premium. On that note, Cramer continues to tout both Google and Apple – which is not really going out on a limb here. The question is who doesn’t? Apple is now the world's No. 1 company and the stock is in every hedge fund portfolio. Apple’s current challenge is to preserve its empire, while Google’s No. 1 priority continues to be to make that challenge more difficult – this is great for investors. This continued battle forced Google to acquire Motorola Mobility (NYSE:MMI) earlier this summer.

One of Apple’s advantages has always been its platform unification while others such as Google’s Android have more of a fragmented platform. When compared with the unified IOS of Apple, there were some major differences, particularly in the area of hardware configurations. From a customer’s perspective that is something that might be overlooked, but from the standpoint of development, it raises questions. Google saw an Apple advantage and wanted to take it away. But will it be enough? I agree with Cramer on these selections as he termed them “consistent winners," but it did not differ from what many had already assumed.

Activision

Cramer was also bearish on gaming stocks and suggested that leading software developer Activision should be a sell. I have to disagree. Activision is now arguably the top game developer for consoles, second to only Electronic Arts (ERTS). The popular “Call of Duty” franchise is the hottest game on the market and one of only several in a long portfolio that drives the sales of Activision.

The recent success of "Black Ops" pushed Activision to its highest level last year by the end of December, although Activision's shares are down slightly year-to-date. Still, the company has made shareholder friendly moves with the recently announced $1.5 billion stock buyback program and 10% dividend boost, which now yields 1.5%. The company fits the criteria of a “Cramer stock.” So I fail to understand the reason for the sell recommendation.

I tend to believe that he along with the market were slightly disappointed by Zynga’s (NASDAQ:ZNGA) IPO which saw the stock drop below its IPO price. But that should not imply trouble for a well established game developer. Investors should also consider the fact that demographically, the amount of gamers has increased 22% since 2005, and the time they spend playing games has increased by over 15% since last year. I would certainly accumulate Activision at current levels.

Texas Instruments

It was hard to disagree with Cramer on Texas Instruments, but I still think rating it a sell is a tad too drastic. The company recently announced disappointing earnings as well as unfavorable outlook so I get why it has fallen out of favor not only with Cramer, but also Wall Street. But looking at its numbers going into 2012, I have to think that the worst is behind it.

The company’s biggest challenge continues to be its tough competition. With state-of-the-art lower-cost manufacturing in place, this should allow the company to compete more effectively on price without risking margins. Price competition/margin trade-off is a seemingly ever-present concern for investors within the chip sector. Another challenge for the company is convincing investors that it is time to reconsider chips.

I will concede that the upside on the company may be limited, but it is far from a sell when one considers that the company is already (arguably) below its fair market value. Investors should also consider that cash flow conversion question - the extent to which TI is undervalued today really does seem to hinge on just how good the long term margin potential is.

E*Trade

E*Trade was also recommended as a sell by Cramer. Though it was hard to disagree with the call on account of its less than stellar DARTs (Daily Average Revenue Trades), I had to. These were down 10% and 11%, respectively, for quarter and yearly figures. But I attributed the poor numbers to the disastrous summer experienced in the bear market as investors opted to stay away. Figures that I believe will return when optimism also comes back.

But the company is not alone in that regard as TD Ameritrade as well as Charles Schwab fared pretty consistently. E*Trade's online retail brokerage business, however, is still performing well, contributing to the company's ability to stay afloat. Overall, the brokerage business remains relatively healthy, despite the huge meltdown of the stock market this past year.

The company’s stock has taken a beating this year and it is hard for me to consider it a sell since it is already hovering near its 52-week low. As with anything in the market making money on this stock will require some patience. While I would not recommend it a buy at the moment, taking a loss by selling at current levels is far from prudent.

Disclosure: I am long AAPL, ORCL.

Source: 2 Technology Buys And 4 Sells From Cramer, And Why He's Wrong