Where faux wisdom makes real money

In tech, several of these tropes are making the rounds. But just because they're not true doesn't mean they're not profitable.

By Jim Cramer Apr 17, 2014 2:11PM

Sandisk © Simon Dawson/Bloomberg via Getty Images
Sometimes the case in the tech world gets made even when it shouldn't be, and everyone eventually accedes to it.


For example, even without any real evidence that the personal computer business isn't falling off a cliff, the consensus has developed that it has gotten better. This view says you need to buy Hewlett-Packard (HPQ) and Intel (INTC) -- which, these analysts also claim, have lots of storage kickers away from personal computers to bring out value.


That's just perceived wisdom, but it has been one of the strongest calls out there.


TheStreet.com logoOr how about Seagate (STX) and Western Digital (WDC)? The consensus, as represented by short sellers (investors betting against these shares) -- and not unlike the view on HP -- has been that disk drives are going away courtesy of the personal computer's secular decline, and aided by increased production.


But these very basic tech components have managed to keep new supply down while at the same time becoming "low-multiple cloud plays." That's because you need to personally store your pictures in case something happens to your handset or if you run out of room.


Disk-drive makers have turned out to be the hottest segment in the market. Again, these shares are rallying because there is an amazing base of short-sellers in them. SanDisk (SNDK) is rallying, similarly, because it is perceived as the only pure play on the tablet revolution.


Of course, while we now love Seagate and Western Digital as cloud-computing plays, the actual cloud plays are now scorned because there are too many of them. One of the eerie analogies to the 1998-to-2000 period is that, back then, there was such an initial lack of Internet plays that they all got bid up. (The revolution began when CBS MarketWatch came public in 1998.) It took a while to saturate, almost two years. But once you got the saturation, the group was history.


At the current juncture, cloud is at saturation levels -- but the existing players, at least, are profitable. Still, as hot as the drives are despite their old-fashioned nature, the software-as-a-service plays are just plain full-up.


For the longest time we heard that it didn't really matter if Apple (AAPL) introduced a bigger-screen handset. Turns out that the big incremental sales pick-up comes from at least a 5.1-inch screen -- that is, Samsung's Galaxy -- and even that might not be big enough.


When you listen to the Google (GOOG.LGOOG) earnings call, you get that bigger is better, because people are spending a huge amount of time on their handsets and they simply are too small. The iPhone is too small. Daymond John, the "Shark Tank" judge who predicted Samsung's Galaxy would catch and pass the iPhone a year before it happened, basically said same this week when he was on "Mad Money."


One thing is absolutely for certain: This newfound conventional wisdom makes you money pretty much on good and bad days. The rest is just a free-fire zone for the short sellers. This is in part because of secondary offerings, in part because of insider selling, and in part because there are so many more deals in the pipe.


But they aren't going to have any more companies like Intel, SanDisk, Seagate or Western Digital -- with their share buybacks and dividend boosts and no insider selling to speak of -- coming public any time soon. Maybe that, more than anything else, is real reason for the dichotomy.


Jim Cramer


Jim Cramer's Action Alerts Plus: Check out this charitable trust for the stocks Cramer thinks could be winners. The portfolio is long AAPL and GOOG.L.




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36Comments
Apr 17, 2014 2:40PM
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"Where faux wisdom makes real money"

What about when real idiots keep printing faux money?
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Fed's balance sheet logged $84 billion profit last year

WOW the Feds are red hot with $4 trillion dollars in stocks and bonds they managed to pull out

2.1 percent profit. Dudes the normal return as all the financial advisers are telling us is 8 percent so you should have made $320 billion profit -- losers

Apr 17, 2014 4:24PM
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Market junkies are like sports junkies. Cramer is a market junkie. Everything to Cramer is about the market. Macro Economics is secondary it is all market action, market action, market action. Fatty is more like Cramer than even he realizes. These cats have blinders on and that is just how they want it. The market originally existed for folks to trade shares of business that had accountants that belonged to a National Organization with standard practices to evaluate profits on an equal consistent basis. The FED now screws with interest rates and has moved to the point folks invest in the anticipation of interest rates and how these might or might not effect stock values by what investments are made in plant and equipment. Just look how this has been perverted over the last twenty years. We now look at dividends as being of secondary importance. How did we get to this point where earnings are not the prime consideration in determining share price?  Too goofy for us older folks to understand the many many ways share prices are now being calculated. Almost seems like this is all designed to confuse and remove the rationality of the process.

Apr 17, 2014 3:12PM
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Floor trader crushes out a cigarette on the restroom floor on a break and overhears the janitor mumble "Scumbag"........ WE will get you. 

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With the Fed still pumping money in the stock market hardly anything is a loser right now.

The story will be different come Sept 15 2015 and the dollar has collapsed

Apr 17, 2014 3:28PM
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Reid is starting to remind me of Hedley Lamarr.

Apr 17, 2014 3:54PM
Apr 17, 2014 4:29PM
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Not a bad close, flat to up a bit; the S&P matters most....Sadly the socialist kenyan spoke before the closing taking away any chance the Dow had of ending the day in the green; glad he didn't spew his lies and stupidities an hour earlier or we would have ended in the red across the board....Folks, as you know, Wall Street cant stand this worthless community organizer...Oh well, have a great weekend all.
Apr 17, 2014 2:55PM
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Nothing has changed much, low volume, the good guys trying to end the day in the green and the scumbags trying to bring us down...Another day at the office....More after the close.
Apr 17, 2014 2:39PM
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Hmmm, no one hitting the Cramer-go-Round.....Must be Friday afternoon..? To many.
Apr 17, 2014 3:27PM
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Yup a ho-hum day, heading into the Holiday extravaganza, Easter Eggs, Bonnets, Church and such.

Been a pretty good week, nothing "earth shaking"..

Pretty much back where we were two(2) weeks ago...

Fair Market Values, probably rose on several portfolios...?

We had a good week...

Maybe Ukraine/Russia will settle down over the Holy Week and weekend...That'd be nice.

My 4 day weekend is starting now...

I have to take out trash, burn papers and maybe do some raking...

The close isn't going to change or mean much.

No rest for the wicked....Ciao....Have a nice one.

Apr 17, 2014 3:08PM
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Ok Re Tog just for you before I head out for a 4 day Easter break !!

Coming soon to a bookstore near you Cramer's new book,

"Faux Wisdom and how I used it to rip off a gullible American public" 

Happy Easter !! :)
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