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James Cramer's Stock 'Dream Team'
The hedge fund manager makes his picks for the starting five—companies that just keep on delivering.
By James J. Cramer, TheStreet.com
At my hedge fund, Cramer Berkowitz, we've been assembling a dream team for the millennium, one that can last, that can play for more than just a quarter or two. We want durable players, ones we can put in that won't wilt in the stretch.
Of course, when we speak of dream teams, we aren't speaking of a mixture of the San Antonio Spurs and New York Knicks. We're talking world-class companies with stocks that remind us of the Michael Jordan-led Bulls. If you want my dream team, a team that I have confidence in, let me give you my five picks for the stock championship.
Every team needs a dominant center, an anchor that won't quit, that comes to play every day and owns the key. For us it is Cisco (CSCO). I have a picture of the starters from the great Chicago Bulls on my desk, but it doesn't look like any champ picture you have ever seen. Superimposed on old No. 23's jersey, sporting the body of Jordan, is John Chambers, the man who runs Cisco. The comparison is apt: Both Jordan and Chambers are money in the bank, the highest compliment I can pay a star.
The consistency with which Chambers has managed Cisco, plus its incredible markets—Cisco dominates all Internet plumbing—make this as close to a must-own as I have ever seen. I would feel naked without my Cisco, which is why you always see it on my trading sheets. Its ability to execute is exceeded only by its ability to acquire well. It reinvents itself for the better with each acquisition.
Every team needs a power forward, a muscleman who makes things happen, isn't afraid to play tough, and intimidates the competition. In this market that's America Online (AOL). The Internet is here to stay. I have tired of people who tell me we don't know who the winners are yet. AOL is a winner. It has huge revenue, giant marketing muscle, and the clout to make people pay to run things on its site.
The knock on AOL—that users have to pay—seems like nothing but jealousy. How terrific to have that methodical revenue stream. Nobody else could even dream of charging because they don't have the value added. Most 'Net companies are a crapshoot, but America Online has proven management in Steve Case and Bob Pittman, and a level of vision that you just don't find in most companies. When the advertising dollars start to cascade to the 'Net next year, AOL will get more than its fair share.
Let's pair AOL with its free counterpart, Yahoo! (YHOO). Here is a company that is run like a well oiled-machine. It has more speed and more flexibility—it moves on a dime and acquires great companies methodically and intelligently—than its bigger counterpart, AOL. And it has a tremendous sense of mission.
I spend a lot of time with Yahoo! And feel that its site, bare-bones and informative, will take the place of the world's yellow pages, encyclopedias, and newspapers in a very short time. Already this company has changed the way people think about the 'Net. I know I do everything from listen to pro football games of my beloved Eagles on Yahoo! radio to follow the overseas stock markets through its excellent personal finance section. Yahoo!, like AOL, is still a tad down from its all-time highs. Look for that to be breached in short order. We are certainly betting that way.
You also want some guards who can bring the ball up and put it in the hoop. You want guards who are fast, who can make great plays, dazzle on the court, yet not get intimidated by the other team's big guys. That's why I want Nokia (NOK) and Oracle (ORCL) in the backcourt. Here are two companies that reinvented themselves in a fashion that took everybody by surprise.
Nokia made TVs. It was nobody. Motorola (MOT) owned the cell phone market. While everyone fretted about the coming charge of the Japanese, the Finland-based high-tech company took the world by storm. Now people speak of having their Nokia with them at all time. It may turn out to be like Kleenex and Xerox (XRX), two companies that transcended brand and became the category name themselves. Nokia also has kept the rights to its interface, meaning that the company could reinvent itself as a personal email and stock trading appliance if it keeps pioneering. Which it will.
The fifth player on this dream team wouldn't have been there if it weren't for this 'Net revolution. Oracle was a boring database company. Now when you speak about how companies run their e-businesses, you are really speaking about how companies have turned to Oracle to jump-start their e-businesses. I know when I grilled our tech team at TheStreet.com recently about which firms are responsible for the output of our site, all I got were a bunch of new companies, most of which just went public, and Oracle. This company is the vet behind the scenes. It lacks Cisco's worldwide dominance, but I wouldn't bet against it. Oracle's still growing. It could play center one day.
Uh oh, I know what you are thinking. Those who have followed my writings from the early '90s must be thinking: Where the heck are Intel (INTC) and Microsoft (MSFT)? I have to give you the toughest answer a coach ever says to a player: They are on the bench. Mister Softee is just too problematic ahead of the havoc that the Justice Department might cause. I have highest hopes that things will be resolved without too much trauma for Microsoft. But when I am assembling a team for next year, I have to know the result of this decision before I pull someone and insert Microsoft.
Intel? Look, like 'Soft, I am long Intel. I am always long Intel. But this is a game of execution. Intel hasn't executed well enough of late to deserve a slot on the team. History gets Intel on the squad, but the starting five? You have to be perfect to be on the dream team's starting five. Intel just doesn't make the cut right now.
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