Cramer's Mad Money - The Most Important Piece Of Government Data (2/10/14)

Includes: CSCO, FCX, GLD, KHC, UNP
by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday February 10.

The Most Important Piece of Government Data

There is so much economic data that comes from the government that one may wonder what moves the market and what doesn't. Cramer rejects the weekly jobless claims as important, and thinks investors should look to the non-farm payroll monthly report. He shows a correlation between the movement of stocks and this information. A bad non-farm payroll report can send stocks down for weeks, and two bad reports in a row can cause a more sustained correction. However, a stable non-farm payroll report can bring stocks up and a strong report can send stocks much higher. Cramer cautioned investors to wait until 10 am after the release of the report, since often stocks shoot up as short sellers flee their positions, but usually drop after 10 am. The time to buy is often later in the morning.

While many think the Fed minutes are important, Cramer says these minutes are out of date, since they arrive a month later. "The Fed minutes are a total sideshow. They are not actionable."

Cramer took a call:

When asked how much of a pullback in a good stock signals a buying opportunity, Cramer replied that a 5-7% dip in a stock may be a buy signal.

Never Dump A Stock If You Have Conviction. Stocks discussed: Union Pacific (NYSE:UNP), Freeport McMoRan (NYSE:FCX), Kraft (KRFT), SPDR Gold Trust ETF (NYSEARCA:GLD)

Many investors are hostages to the media cycle, which spins on overly hyped information. Many investors look at the 13F forms of large investment firms for clues about what to buy or sell. One mistake people make is to assume if a famous hedge fund is buying or selling a stock, that is a signal to buy or sell. Cramer cautions never to sell a stock if one has conviction, because we can't know why the fund manager is buying or selling. Cramer gave the example of Union Pacific (UNP), a former holding in his charitable trust, which he sold on news that Warren Buffett was selling it. However, the only reason Buffett sold it was so he could use the money to buy its competitor, Burlington Northern. Buffett was selling UNP not because he didn't like rails, but because he wanted to buy a railroad company. Similarly, Buffett sold Kraft Foods (KRFT) when he had a disagreement with CEO Irene Rosenfeld. Those who followed Buffett, who had his own reasons for selling, missed an uptick in the stock that occurred when it split itself up. One manager was bullish on Freeport McMoran (FCX) a few years ago. Those who followed his buying of the stock lost a bundle, since the stock tumbled after that.

Cramer took some calls:

Instead of looking at the Producer Price Index as a sign of inflation, Cramer follows the bond market. If bonds go higher, that might be a warning of inflation if there isn't also a strong economy. However, right now, Cramer is more concerned about deflation than inflation.

Gold is still a good hedge against the dollar. A portfolio can contain 10% in gold, whether through gold coins or the SPDR Gold Trust ETF (GLD).

Cheaper Is Not Always Better. Stock discussed: Cisco (NASDAQ:CSCO)

Some stocks provide buyable pullbacks, and others become cheap for a reason. Potential investors should do homework in a stock to see whether there is an issue of a broken stock or a broken company. Sometimes a stock may seem inexpensive, given a lower multiple than its peers and a strong growth rate, but it is important to establish whether that growth is accelerating or slowing. Cramer admits to the error of having bought Cisco (CSCO) for his charitable trust when it seemed to be trading at a discount to its peers and had a strong growth rate, but what became clear later was that Cisco's growth was slowing not increasing. Cisco reported a lackluster quarter and the stock got hit.


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