Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday June 29.
In this last week before earnings season, Cramer would use any gains to lighten up on tech, industrials and banks that have significant international exposure. Many retailers are oversold and may look attractive. Healthcare is a good place to be since the Supreme Court approved healthcare legislation.
June ISM Index should be "severely disappointing."
German PMI Index has not been showing signs of weakness so far, but it might start to reveal some cracks.
June Auto Sales have been strong, but Cramer warned investors not to be tempted to buy Ford (F) or GM (GM) if the numbers are good. These companies might be selling plenty of cars in the U.S., but they have too much European exposure.
EMU Retail Sales should not be strong. Spain may raise its sales tax, which would be bad for growth, but Germany might insist on Spain practicing austerity.
European Central Bank Meeting: The ECB raised interest rates twice last year, and Cramer thinks that this was a disastrous move. He thinks they should cut the second rate hike. If the ECB does not cut rates, investors should expect more pain for stocks.
Crude Inventory Number: If it is high, expect a drop in oil and gas stocks. Cramer would lighten up on holdings in this sector ahead of this announcement.
June Jobs Report: No one expects a good number. Cramer would not own industrials going into this report.
Cramer took some calls:
SPDR Gold Trust ETF (GLD) should be a part of every portfolio, even though gold is likely to be sluggish until the Europeans start printing more money.
Google (GOOG) is very levered to Europe, especially since it has been barred from China. Cramer would not own Google.
A Company Versus A Stock
There is often a divergence between the performance of a stock and the quality of a company. A stock can be unfairly punished because of macro rather than micro data, because its sector is being punished or because money managers need to lighten up on a certain position. Short sellers can make stocks volatile; a short squeeze occurs when a stock, which has a large number of investors betting against it, releases some good news, and shorts need to abandon their positions. As a result, the stock may skyrocket, even if its underlying story is not as bullish as the movement of its shares. The key to effective investing is to recognize when the stock price tells a different story than the fundamentals, and buy or sell accordingly.
Do Your Homework
Fundamentals still matter, even though sector and macro data can affect the movement of a stock. Cramer reiterated his suggestion that every investor do an hour of homework a week on each stock they own. Some assume that if information is readily available, it is already "baked in" to the stock price. However, even big investors can be lazy, sometimes trading off of headlines or the charts. Investors who do research are better informed and can afford to take more risks.
IPOs are a great way to make money on a quick trade, but investors should be careful because losses often happen. Facebook (FB) was a prime example of an over-hyped IPO that declined below its offering price after a small pop. Linkedin (LNKD), however, rose 100% the first day of trading and has remained a good stock. One trick to buying an IPO is to look at how many shares are being offered. If demand for shares is high, the stock is likely to have a significant pop on the first day, but there is almost always a sharp decline afterward. Cramer would avoid buying these deals in the aftermarket.
When looking at an IPO, the main thing is not what the company does or its management. The first thing to notice is what brokerage is handling the deal. High quality brokers are aware that they are putting their reputation on the line with every deal they make, and are likely to refuse to deal with very risky IPOs. Cramer would avoid deals sponsored by private equity firms, since they often are trying to spin off poor companies.
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