Cramer: Place your bets for the rest of 2014

Investors know what's working and what's not. These stocks could power higher through the end of the year.

By Jim Cramer Sep 2, 2014 12:07PM

Image: Stock investor © Tom Grill/CorbisBy Jim Cramer, TheStreet


You look at the charts. You study the fundamentals. And you get the same thing. 

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Even on an up day like this one, the market's going to distinguish between stocks that get hurt by a Ukraine-Russia conflict and stocks that are unaffected by it. 


We are now well into discounting a protracted conflict on the Ukraine border without any sign of a diplomatic solution.


It's been a brutal period for some stocks and halcyon days for others. The Standard & Poor's 500 Index ($INX) keeps bumping into new highs because many of the U.S.-based international companies we had been banking on to produce multi-year growth, as they finally started getting revenue relief, are now rolling over and that money's pouring into domestic winners. 


It is true that many of the internationally oriented stocks have rallied since the downing of flight MH-17, the benchmark of the international downturn, but they are stalling out and you need up days like Tuesday to trim them.


It's logical. The worldwide companies' estimates could now prove to be too high because of a combination of a recession in Europe and a too-strong U.S. dollar.


Before I get to what's working, let's just rule out what Europe's done for us. To do this we just need to go back to when Europe was first going awry back in 2012. We realized that tech, which has such a heavy emphasis on Europe, would not be able, en masse, to make its numbers. 


Now there are some special situations playing out here, notably the return of the PC to growth, which you can monitor with Hewlett-Packard (HPQ), even it has a ton of Europe. And some of the cloud plays can still brag of plus 60 percent growth rate -- see Splunk (SPLK). But I don't think the group will be able to transcend Europe when there are so many companies that do not have any Europe to choose from.


I wish Europe were, like in 2012, only causing problems for the industrials. No such luck. The European Central bank has so manipulated rates and the deflation is so powerful that the Italian 10-year trades at 2.4 percent and the Spanish 10-year clocks in at 2.2 percent. The German 10-year is a joke at below 1 percent. Anyone who knows how to handle a wire instruction is sending money here, so the 10-year Treasury is still offering way too much of a yield and the trade has been and remains to be lower, not higher, rates. 


That aberration, given our job growth, seems always on the verge of correcting, but our budget deficit stands out versus Germany's perfect balance sheet and demand from China, Europe and, yes, Russia, and will not let those rates lift.


Of course that means continual buying of the dollar, too. That's why the banks and the big drug and consumer packaged goods companies don't really have much of a chance to have anything other than periodic flares higher.


I think these sectors are so problematic that they are going to stay under pressure and go down every single time we get a ratchet in tensions. That means pretty much daily. It's a huge issue and I think that the white flag has to be run up for the group as we have had to do for Action Alerts PLUS after fighting the tide for too long.


OK, so how about what's working? The ideal companies are a bit of a hodge-podge. Obamacare winners, restaurants and retailers that are viewed as being winners simply because they aren't in Europe and can be driven by job growth and lower gasoline costs, healthcare companies that save others money, entertainment, rails, supermarkets, liquor, employment-related companies, home-improvement plays, master limited partnerships, independent oils with terrific growth and a handful of special situations that should power higher maybe even into year end.


Let's start with those because that's what most people really want. I am pegging Twitter (TWTR), GoPro (GPRO), Tesla (TSLA) and Netflix (NFLX) as the four that people will have trouble resisting.


Twitter's turned the corner ever since CFO Anthony Noto got there to add discipline and ways to make money. GoPro's got an ecosystem with the hottest product for the holiday season, which is already dawning on people after what was a great quarter, but brought in too much profit-taking. 


Tesla's just a really well-run stock and the negativists will not be able to take the pain going in to the end of the year and will most likely cover. Netflix is a worldwide sign-up bonanza and it just isn't going to stop given that it's not trapped by the need to show earnings per share. As more movies are added to streaming and more productions come on line the stock will just power higher.


Now retailers show you the Ukraine bias in action. The best performer's been Home Depot (HD), which is a triumph of management. But Ross Stores (ROST) and Macy's (M) to me are the marvels. Ross was a great stock at one point and had ratcheted down its growth by leaps and bounds. Beating it has brought the stock back to life. Macy's? Clear miss and much higher -- what's not to like?


Everyone wants to call the bottom in Whole Foods (WFM) and a top in Kroger (KR). I say I get the Whole Foods possibility: big, first-time national ad campaign coming, but, to me, the smart money's on Kroger. Restaurants: Play high and low, like Chipotle (CMG) and Jack in the Box (JACK) with its Qdoba kicker. Enough already with Burger King (BKW), a second-rate operator doesn't become first rate with an inversion deal with an extremely fattening concept. The world's turning on doughnuts faster than it is diet soda.


I see so much to like in healthcare that it's remarkable. Anything hospital -- anything, Tenet (THC) and HCA (HCA) are going to be go-to from here until year end. Other non-quitters: McKesson (MCK), CVS (CVS) and Cigna (CIG). All three merit attention. I also think that Perrigo (PRGO) and Mallinckrodt (MNK) have tremendous momentum, the first as we head into cold and flu season with easy compares and the latter with Questcor coming on line. The bears will be wrong there.


Regeneron (REGN), Gilead (GILD) and Celgene (CELG) remain the best ways to play drugs as they are viewed as the ultimate Ukraine immune plays. I think it will take as long for this new Regeneron cholesterol drug to work its way into the numbers as it took Eylea, the macular degeneration drug, to be discounted. In other words, years.


High-growth oil and gas stocks, I think, are about to have another leg up as pipelines come on to get their stuff out of oil ghettos and into refineries at higher prices than they have been receiving. Usual winners here are EOG (EOG), Anadarko (APC), Cimarex (XEC), Apache (APA). It seems to me that oil's done going down and that's nothing but net for these companies.


Pipelines win. You want to roll the dice on takeout, go with MarkWest (MWE) and its terrific Marcellus pipes to the natural-gas-starved Northeast. Core holding: Kinder Morgan (KMI). Ukraine's a win for these guys and it doesn't seem to matter at all that Russia could either shut down the tap to the West or flood the world with oil to prop up the ruble. I think that Russia's become so inscrutable that we can't factor it in. But the rest of the world's putting a demand bid, as well as a supply bid underneath the price and any sign that China's not falling off the grid again is good for oil.


Transports are getting murky and the ETFs can hammer the whole group, especially as air travel seems lighter with Ukraine concerns. But the rails can't even handle all the freight they have and I my money on either Union Pacific (UNP) for cars, sand and chemicals or Norfolk Southern (NSC) for the suddenly-hot coal export market.


Finally, we've got some special situations that call out for buyers. I like Automatic Data (ADP) as a continued play on return to employment growth. Waste Management (WM) could finally see some gains because of construction, which turned out to be the real reason to own the stock. I like Constellation Brands (STZ) and Monster (MNST) as the food and beverage plays. The former's been cooling, even as it just made a brilliant and little-noted tequila acquisition with Casa Noble. The short-timers are now out of Monster, as Coca-Cola (KO) now embarks on what I think will be a creeping tender offer.


Finally, Disney (DIS), with Star Wars beckoning, Time Warner (TWX) with something to prove and Gannett (GCI) with is reorganization all fit into the thesis.


Yep, the bets for the rest of 2014 are being placed. A politician-created recession for Europe that reverberates so it's back to the safety of our shores. To me, it looks like a 2012 redux and you have to switch your game plan on up days like Tuesday to preserve the gains that accrued pre-Sochi, which right now looks like the high-water mark of soft politics.


Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long KMI. Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.

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22Comments
Sep 2, 2014 12:35PM
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Speaking of all about nothing I see V.L. continues on and on and on.  He writes like a person who has been up for 48 hours and just continues writing with little reference to a point or end other than keep doing it, keep doing it,  keep doing it.
Sep 2, 2014 12:41PM
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I'm not putting up with this Idiot any more today.  I'll maybe be back tomorrow.
Sep 3, 2014 1:41AM
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Oh VL, (Veteran Lunatic) we should really just take some pity on you.  Your daily calls for market Armageddon and system wide economic crashes sound too much like chicken little on a broken record.  Your abundance of free time for posting doom and gloom reek of a plethora of poor personal decisions that have already proven you to be wrong time and time again on these message boards.  It’s also reflective of you being a rather failed and chronically unsuccessful investor yourself.  I'm willing to bet that you've lost more money throughout all these years fearing a market crash than you've ever lost in an actual crash. Too bad you've never learned to profit from the very predictable and cyclical greed of others.  Patient long-term investors are not the ones who get burned, it's the short-term gamblers that do.  It seems that you don't understand the definition of the repetitive terms that you continuously toss around.  The thing that doesn't seem to function anymore is YOU as a productive member of society...that's why you've got endless free time to post responses to every MSN article I've stumbled across over the years.  Making over 13.7k posts and repeating the terms “fiat”, "fake money", “kool aid” and “game tokens” endlessly doesn't reflect any significant insight, but it does paint a sad picture of you having no life whatsoever outside of these message boards.  Even a broken clock is right 2x per day V_L, when are you ever going to be?
Sep 2, 2014 7:07PM
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No one is in jail for ANY of the worst crimes and corruption of our millennium, but we can hunt down hackers who post nude photos of celebrities exploited for their bodies and beauty. Maybe we really need to hunt down their contracts and owners and learn WHY they have nude photos online to begin with.
We see a RED BANNER announcing the beheading of yet another media person getting caught where they don't belong but there's nothing said WHATSOEVER about it having been Labor Day and ordinary Americans were forced to work through it while administrative executives did not. We have lost complete focus on who we are... Land of the Free, Home of the Brave... not indentured servants of inheritors. 
Sep 2, 2014 12:29PM
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This article is all over the place.  It reads like a collection of notes thrown together and published without much editing.

The Euro continues to inch down against the USD - IMO it could dip below 1.30 sometime this month.
Sep 3, 2014 11:35AM
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"- Economic growth depends on the productive use of investment and rejuvenation of "capitalistic animal spirits," but that's not taking place now, said , manager of the world's largest bond fund, in his latest investment outlook letter on Wednesday.

"Economic growth depends on the productive use of credit growth, something that is not occurring," said Gross, who manages the $223 billion Pimco Total Return Fund.

Gross said the U.S. Federal Reserve, the Bank of England and other major central banks are now engaged in an "unmodeled experiment" which involves: "What growth rate of credit is enough to pay prior bills, and what policy rate/amount of Quantitative Easing is necessary to generate that growth rate?"

$$$

Well said, Bill. Our choices are clear-- confiscate the markets and redirect it to enterprise, end the Federal Reserve, get RID of Wall Street and- close all banks, flush out the pariah in them, reconcile, regulate and revive ONLY limited to the state they HQ in. Irrational irresponsibility is not an American Ideal.

Sep 2, 2014 12:31PM
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All about nothing.  When there is an alternative to Wall Street for folks to have investment income the art of stock picking will have relevance.  In the meantime it is pin the tail on the donkey.
Sep 2, 2014 7:08PM
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"Let's start with those because that's what most people really want. I am pegging Twitter, GoPro, Tesla and Netflix as the four that people will have trouble resisting."
$$$
These are counter-economy stocks. They drag us DOWN and yet they are hard to resist? Be who? Anti-Americans? Let's get rid of the economy killers and spark some job-generating enterprises.
Sep 2, 2014 7:05PM
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"The  rally isn’t over and the gauge could jump 50 percent more by 2020 as the U.S. economic recovery heads for a record winning streak, according to . A slower though sustained period of growth could help the equity benchmark gauge peak near 3,000, according to a report dated today. The U.S. economy, which began recovering in July 2009, may continue growing for five years or more, making it the longest period of expansion, Morgan Stanley said. The S&P 500 fell 0.1 percent to 2,001.87 at 10:03 a.m. in New York. Three rounds of stimulus have helped spur growth in the world’s largest economy.'

$$$

Not a chance, stupid greedy people. The S&P as you see it today is 100% bolstered by fake money and market rigging. It has ZERO sustainability. Show your PROOF, Morgan Stanley. The Euro has and continues to tank as France decides to exit and the 4 corners of Europe can hold economy without it. The DOW should plow through 3,000 by year-end because dead business models can't find new talent and old talent is headed to the Betty Ford for drug addiction. 

WHERE is our government? No elections without proving any of you can actually work For the People.

Sep 3, 2014 7:46AM
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It's a good day for useless people to lose everything. Can't you see the set-up? Putin is a master at what he does. You are a psychopath Kool Aid addict. Who wins in the end? Not you. 
Sep 2, 2014 7:12PM
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Who can't FEEL the eminent collapse? Financial tyranny has ended horribly several times in history.
Sep 2, 2014 12:24PM
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ok - let me set up my watch list using these stocks as a basis. 

 

I wonder how many go up vs down. 

Sep 2, 2014 2:08PM
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"Place your bets.......... "  -  is there anything more needed.
Sep 2, 2014 12:59PM
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