Valuation Rocket Readies for Takeoff
By James J. Cramer
RealMoney Columnist
7/1/2004 8:41 AM EDT
URL: thestreet.com
If I were at my hedge fund, today I would have come in and fired everyone who did not recommend that we own Broadcom (BRCM:Nasdaq) , Qualcomm (QCOM:Nasdaq) , eBay (EBAY:Nasdaq) , Research In Motion (RIMM:Nasdaq) and Yahoo! (YHOO:Nasdaq) .
I might have given you dispensation if you said positive things about Starbucks (SBUX:Nasdaq) or Novatel (NVTL:Nasdaq) or Sierra Wireless (SWIR:Nasdaq) or Marvell Technology (MRVL:Nasdaq) . I might have cut you a break if you suggested Whole Foods (WFMI:Nasdaq) .
Otherwise, who the heck would have needed you? I simply would have told you to go home and said that I never wanted to see you again.
Let's face some facts about this market. There are a whole lotta stocks doing nothing. There are some blue-chips like 3M (MMM:NYSE) , Deere (DE:NYSE) and FedEx (FDX:NYSE) that are performing well. Some others, like United Technologies (UTX:NYSE) , Boeing (BA:NYSE) , Honeywell (HON:NYSE) and Raytheon (RTN:NYSE) , are outperforming because of the aerospace cycle. A couple of off-the-beaten-track retailers like Urban Outfitters (URBN:Nasdaq) and Chico's (CHS:NYSE) are acting terrifically.
But all of the action is really in five stocks: Yahoo!, eBay, Broadcom, Qualcomm and Research In Motion. Last night we had Robert Gensler on "Kudlow & Cramer," one of the best technology investors in America. He works for T. Rowe Price. He owns all of these stocks. He is a seller of all of these stocks. He can afford to sell them, because they keep getting bigger and bigger in his firm's portfolio.
But if I were a hedge fund manager right now, I could not afford to not own them -- sorry about the double negative.
In fact, if I were at a hedge fund and didn't own them, I would go in today and buy some relatively deep in-the-money October calls on all of them and say, "OK, we've got those covered. Now let's go to work."
I would be saying that because the firms that own these stocks are going to get billions and billions of dollars over the next few weeks and, with the exception of Janus Twenty, which is closed, they will propel them higher.
That's because BERQY (for Broadcom, eBay, Research In Motion, Qualcomm and Yahoo!) is like a valuation rocket that has broken away from earth's gravity. Without that drag, it is a propulsion machine. It is no longer constrained by traditional price-to-earnings ratios. I mean, if something trades at 78 times earnings, can't it trade at 99 times earnings? Or 108 times earnings? Is one any less nutty than the other, once you have left the orb of rationality?
So, my advice to all of you performance geeks out there is to strap on some BERQY and get ready to roll. These stocks have blasted through the ionosphere. Next stop?
Mars.
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Let's watch Cramers picks for 30 days.
On 7/1 Closed
EBAY 90.59
RIMM 71.47
QCOM 72.05
BRCM 45.82
He advised buying, I would bet against against him.
Jack |
