Making Guilt by Association Pay
By James J. Cramer
5/20/99 12:58 PM ET
So Providian (PVN:NYSE) gets whacked, down 17 points, on some San Francisco district attorney inquiry. Can you take a blind shot at it because that seems like a hugely overdone move?
Normally yes, but this time the stock had just been juiced as a Net play the day before so who knows what to do? Who knows what kind of money is in that stock? I felt it was too risky.
To me, the safer plays are the collaterally damaged plays. You could have bought Capital One Financial (COF:NYSE) down a dollar today, and made a quick four points. Right now I am studying whether to buy MBNA (KRB:NYSE), another excellent company tarnished by the collateral damage.
Often I find that when a stock taints a group, the best bet is not the tarnished stock but the ones who haven't done anything wrong and got indicted by the market in some sort of guilt-by-association thing.
COF was down six yesterday, so that made sense, given the company's strong fundamentals. KRB recently held a meeting and said things are doing quite fine. Now COF, up 4 as I write, is too hard, even though it splits in a fortnight.
KRB lacks the pizazz of COF, but I would suspect that in a few days, with a flat bond market, it works its way back to pre-Providian blowup levels.
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