| | | Jim Cramer says if a company doesn't make real things and have real profits, the risk of big losses is high. (In 2022)
We're in a new year and a new phase of the business cycle, Jim Cramer told his Mad Money viewers Tuesday. That means conceptual stocks are out and tangible stocks are back in fashion. If a company doesn't make real things and have real profits, then prepare for big losses.
The best way to look at investor sentiment as we enter 2022 is to look at the stocks of Okta ( OKTA) - Get Okta, Inc. Class A Report, a cybersecurity company, versus Deere & Co. ( DE) - Get Deere & Company Report, a good old-fashioned machinery maker.
Okta is a turbo-charged tech company, one with amazing revenue growth, but not a lick of earnings. Last year, investors were willing to pay up for the prospects that Okta will one day have great earnings, but now that the Federal Reserve is our foe, those future earnings look a lot less attractive. Okta has no stock buyback, nor a dividend to protect its shares, which means there's no floor to how low it could sink.
Compare that to Deere, which makes real things and has real earnings. Deere trades at 16 times earnings, unlike Okta, which trades on sales. Deere is easily understood and has a small dividend and a stock buyback program. It's also benefiting from the new infrastructure bill and an uptick in farm spending.
In this light, it's easy to see why Deere has rallied 6% over the past month, while Okta shares are plunging. In this market, even a serial screw-up like Boeing ( BA) - Get Boeing Company Report can rally $10 this week, and Ford Motor ( F) - Get Ford Motor Company Report, which trades at just 12 times earnings, soared 11.6% Tuesday on the news it will once again double the output of its upcoming electric F-150 pickup.
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