Remember Cramer? He is the guy that has been all over the map with the ISDEX. He was short,long and short and long. His poor followers could not keep up with him. A couple of weeks ago he changed his position 3 times. LOL... he is entertaining:
THESTREET.COM - Nov 25 1:12pm
MOTLEY FOOL | THESTREET.COM | ISDEX | ONLINE INVESTOR |
Wrong! Rear Echelon Revelations: Net Stocks and Touchdowns
By James J. Cramer
The action in the Net stocks this month seems to make a mockery of two long-held notions in investing: You make your biggest money long term and discipline is your friend not your enemy.
None of us, particularly those of us who have traded and invested for a couple of decades, wants to believe that the rules that we have lived by are now out-of-date. The fascination that the Net holds and the tremendous price gains these stocks have achieved have rocked many of us to our core. We can't believe that our accepted three- and four-yard off-tackle run plays have been left in a cloud of dust by the invention of the forward pass.
Truly, that is the analogy for many of us. And the simple conceit is that for the longest time in the NFL you didn't need a passing game, but you shouldn't bother to show up at the stadium this Sunday if you don't have one now.
It's the same with the Net. I know that when an Amazon (Nasdaq:AMZN - news) doubles in a week, I feel foolish holding on to stocks that I expect will have value brought out in the next three to five years. I know that if I want to outperform, I am going to have to learn the relative strengths of the Net stocks and find the ones I am most comfortable with owning and trading. I am going to have to jettison some of those stocks where value is not in a hurry to be brought out and buy some of those with wings.
To not do so, is to deny yourself the forward pass.
For me that means meeting with all of the analysts, trying to get to know the managements, familiarizing myself with the products and watching the trading. My ability to stay long Yahoo! (Nasdaq:YHOO - news) and AOL (NYSE:AOL - news) , and to a lesser extent Amazon, throughout this whole mania phase rests on a bedrock belief that these are the kinds of passes my team can catch. I use Yahoo and AOL everyday, I am very familiar with their managements, they are respected by the analyst community and they trade with some degree of consistency (as opposed to eBay (Nasdaq:EBAY - news) , which trades too erratically even for me). I forced myself to get familiar with this group because I want to have the pass in my arsenal. Internally I compare eBay to the long bomb, or even the roll right, throw left combo that I can't do.)
The football analogy works for me, though, because it does not confuse the two principles embodied in the first paragraph of this story. It is outright true, if not downright historic, that you could have made more money short term in these Net stocks than you could in a lifetime worth of paper and chemical stocks. But they do not make a mockery of the adage that discipline is your friend.
In fact, I would argue that it took tremendous discipline to stay in AOL and Yahoo. It took incredible willpower to hold these stocks knowing that all conventional wisdom said these companies would never reach billion-dollar valuations, let alone multibillion dollar ones. To go back to the football analogy again, these two stocks are like picture perfect pass plays into traffic, they are precision routes that yield high returns.
My point is that if you or your adviser said it was undisciplined to own a Net stock, that's simply not a good enough excuse at this juncture. These stocks were and remain pass plays, and the good adviser never restricts his game only to what he knows when all around him easy points are being racked up.
So, adjust your game. Learn the pass. Don't sneer at it or confuse it with a lack of discipline. For some it may not be your game, especially if trading is not your game. But in some respects, if it's not your game, you need to make sure you have a backfield like the Broncos and hope everybody else plays defense like the Eagles.
Personally, coming from Philadelphia, I know there are just not enough defenses that let you score with impunity in any league, whether the contest be on the gridiron or in the Nasdaq.
Random musings: OK, for the longest time, CNBC has been running these Hammermill paper ads, and I always joke to my assistant, Jeannie Cullen, that we have to buy Hammermill, like anybody really makes those decisions off an ad.
Then about a month ago, CNBC started running these Great White ads, and I told her to switch to Great White. As an aside, I asked her who makes it. The answer came back Union Camp (NYSE:UCC - news) . So, I did my due diligence, made some calls and came back with the conclusion that International Paper (NYSE:IP - news) was gonna kill these guys. I was right! But I didn't think it would happen by acquisition.
You forest product traders out there got a real dose of Net-like excitement on Tuesday. The only difference? On Wednesday these stocks will be as exciting as watching trees grow, but the Net will be leaving the silos right on schedule . I can just see the commotion over the Union Camp deal, as all of the advisers and lawyers are so tied up over the weekend that these guys probably had to wait their turn in the merger queue. And this was a monster big deal.
Funny thing about merger activity, it is a heck of a lot more lucrative than sales and trading and takes far fewer bodies. So it makes sense with the spreads narrowing in the corporate world that the brokerage stocks can go higher after their double. I am playing it that way.
For those of you leaving and hitting the road before the end of the day, Happy Thanksgiving to you and your families. And when the topic turns to that wacky stock market, don't forget to mention www.thestreet.com!!!
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At the time of publication, the fund was long Yahoo, AOL and Amazon.com, 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 a letter to TheStreet.com at letters@thestreet.com.
© 1998 TheStreet.com, All Rights Reserved.
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