Sig, I am beginning to worry about DELL, it is a core holding of mine and many here. Your feedback would be appreciated. See Cramer's comment's below.
There's More to This Market Than 'the Stocks Everybody Loves'
By James J. Cramer
2/15/99 6:30 PM ET
The market's ability to make fools of us can never be underestimated. Just think, if I were to tell you that Yahoo! (YHOO:Nasdaq) could be cut almost in half or that Amazon (AMZN:Nasdaq) would drop precipitously, wouldn't you automatically conclude that the whole market would get swept down with it?
......
Now I am thinking that the same thing is going to happen with The Stocks Everybody Loves, or TSEL. Yep, we are seeing cracks in TSEL. Dell (DELL:Nasdaq) gets knocked over by a feather, an analyst number cut. Cisco (CSCO:Nasdaq) trades awfully. Intel (INTC:Nasdaq) is hostage to whoever whispers last. And I am long these stocks! Can you imagine what the bears are saying.
But contrary to what everybody would believe, I think this defrocking of the leadership might be good news because it could lead to other sectors and other stocks doing well. We have all played TSEL to the hilt. We have taken the multiples about as far as they can go without being Japan 1989. We have embraced the cult of management personality to the point where if one of the top honchos of TSEL were to leave or fall ill, it would take the whole company's stock down with him.
So, I think the big surprise of this current move is that when The Stocks Everybody Loves get hammered, other stocks will not follow this leadership.
In 1990 we had similar parabolic moves in a handful of companies. It was mania-like, although not to the degree we have seen in the last few years. But Bristol (BMY:NYSE) and Abbott (ABT:NYSE) went straight up everyday. Again, there were just a handful of stocks leading and no one following. Then the Gulf War broke out and the leadership got hit along with everything else. But out of the chaos came the great bull market we are in now.
Unfortunately, this bull market has gotten way too narrow. We need to see people willing to leave big-cap growth and find other names. That's what is happening now.
If you are long TSEL, do you have to abandon ship? As always, I can only tell you what I am doing. I have scaled back my positions in TSEL. I have cash on the sidelines. And I am awaiting a leadership switch to less inflated stocks. In the meantime, if TSEL keeps ramping, I will make some money -- I have out-of-the-money calls on almost all of these stocks. But if it gives up the ghost, I will still be in the game.
That, after all, is what counts.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication, the fund was long Dell, Cisco, Intel and Yahoo!, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to letters@thestreet.com. |
