Europe is the new swing factor
The EU recovery has put heavily exposed US techs and industrials in an enviable position.
Why do people keep talking about how industrial and tech names still seem undervalued even after this remarkable run? I think I have the answer: Europe. Just last week on "Mad Money," I interviewed the CEOs of Avnet (AVT), PPG (PPG) and Eaton (ETN) -- three great American corporations that do a huge amount of business overseas.
All of these companies, like so many terrific U.S.-based enterprises, diversified into Europe many years ago as they recognized that the European Union opened up a gigantic market of 700 million people, all served by one currency. We forget that, before the euro, it was difficult to do business in Europe because of all the different fluctuating currencies and interest rates in each country. The euro truly did unite Europe when it comes to commerce, and it enticed our companies to buy and build there with alacrity.
So we have Avnet, the technology superstore; Eaton, the electrical-equipment concern; and PPG, the proprietary-coatings-and-glass company. These three have represented the cream of the crop in their respective industries, and each company knew it offered superior products and that it could take share from the locals.
Now, if you'll recall, Europe really didn't come down with its version of the economic flu until well after the U.S. economy hit the wall. The illness, moreover, was magnified by two-interest rate hikes that crushed industries in almost every European country except Germany. No company had been prepared for the ultimate depth of the European recession, and the above three firms saw dramatic sales declines in their respective European businesses. That, in turn, hurt overall revenue and earnings, because the continent represented roughly one-quarter of the entire geographic revenue mix.
Now, though, all three of these companies see a noticeable stabilization in Europe that has occurred just this past quarter. Yes, it is true that none of these CEOs -- Avnet's Rick Hamada, Eaton's Sandy Cutler and PPG's Chuck Bunch -- expect anything robust to come from Europe anytime soon. But all expect 2014 to be better than 2013. When you combine easy sales and earnings comparisons with a weaker dollar vs. a resurgent euro -- the currency pair is at $1.38 Monday, a two-year high -- you get the possibility of a pretty huge swing in earnings. Chuck Bunch indicated that even a couple percentage points' swing in European revenue could be huge, because a massive amount of costs had been taken out amid the prolonged downturn.
The techs and the industrials aren't the only companies that have diversified into Europe. U.S. packaged- consumer cyclicals, indusrgoods companies and pharmaceuticals are dominant players there, as well. However, none saw a downturn nearly as huge as that of the cyclicals. Europe could now act as a healthy offset to a U.S. slowdown caused by our dysfunctional government -- something that our purely domestic companies won't have in their arsenal.
Given the breadth of the product Avnet sells in Europe, including semiconductors, software, disk drives and flash memory, you can expect that many of our tech companies are going to see a similar boost. You can say the same about companies as diverse as Honeywell (HON), United Technologies (UTX), Emerson (EMR) and DuPont (DD).
Moreover, we are very likely to see that big advance in sales for which so many have been waiting. I have held that it has been stupid, and is stupid, to wait for it. By the time it happens, these kinds of stocks will have advanced so far that the move will already have been made. That's why I think you need to buy these stocks on any material weakness we get in this country -- a bad U.S. labor report, or a soft gross domestic product figure or retail-sales number. That's because Europe, not the U.S., is now the swing factor. Given the cost takeout and the possibility of very good continental sales, I am sensing that these stocks could be the biggest standouts for 2014.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long ETN and HON.
More from TheStreet.com
- Cramer: Europe is just starting to turn
- Apple's next catalyst: Santa Claus
- U.S. Bank makes mobile credit card play
so you talk to these various CEO's, then do an article on "buy these stocks". is this to get a share price blip that helps the same CEO's get their bonus numbers up for a nicer polished gold bonus?
pick 300 leading companies and write the same article of "europe is getting better but not right away" and say the same thing.
The markets or several stocks are doing fine today...
Although I don't see any of Bobo's picks on the rise..??
I'm baking bisquits, pigs in a blanket, and a nice yellow cake. We'll make meatloaf later..
I have no time for market guessing games...
Then to prove I'm still a man..
Then I'm gonna go out and cut down a tree, and maybe kill something in the woods..?
After that I'm gonna get in my 4x4 and look for Fatty on the roads or bridges.
1)Global issues of $500-700Trillion in scam Derivatives never addressed.
2)Euro-Zone still in massive Unemployment Crisis.
3)Global issues of massive Corporate Debt issuance
4)Record Stock Buying on Margin
5)Temporary reprieve due to lower rates and gasoline prices lately
6)Japan Tax goes from 5% to 8%
7)Student Loan Debt Crisis
8)China is Financial Time Bomb
9)Other Brick Nations to soon follow China
10)Lack of a Living Wage
So Jimmy, this just covers a few of the current issues we face but just because the Markets keep moving higher, you feel a need to PUMP more folks in. You and I both know that overheated Markets can continue in spite of actual valuations. Folks like you only make it worse and the HYPE reaches higher and more dangerous levels. You will never tell anyone that until after the next Crash and everyone who doesn't take profits gets burned again. Jimmy, you are despicable.
What do you call an ignorant Teabagger with an I.Q. of 50?
A potential Republican candidate.
Whats the difference between an angry Teabagger and a terrorist?
You can negotiate with a terrorist.
What is the difference between a smart Teabagger and the Loch Ness Monster?
Some people claim to have actually seen the Loch Ness Monster.
What do Teabaggers call an elitist?
Someone with a sixth-grade education.
What did a Teabagger say when he got his sister pregnant?
Don't tread on me!
When asked if he was a racist, the Teabagger responded:
I'm not a racist, I just hate Ni-ggers, Wet-Brownbacks, Rag-heads and Chinks. Nothing racist about that. It's called freedom of speech!
Did you hear about the Teabagger couple who froze to death at the drive-in?
They went to see Closed for the Winter.
What do you call a Teabagger with 2 brain cells?
Where can you find a delusional Teabagger hypocrite?
Throw a dart blindfolded at a Tea Party Rally.
What did the Teabagger say to the doctor when she found out she was pregnant?
Are you sure its mine?
How do Teabagger brain cells die?
Despised and alone.
When asked about God and guns, the Teabaggers responded:
Jesus was a killing machine!
What do you get when you offer a Teabagger a penny for his thoughts?
Stupidity you can believe in.
What was the Teabaggers greatest achievement?
Not sure they still make MadDog, maybe Boone's .?
But they still make shidt that's just as bad or a cheap drunk.
Along with those, was "Thunderbird's the Word."
Had a good nap....Markets were good to fair today, closing up a little on FMV's.
Time go dig some more taters.
Meatloaf tonight.....Don't let yours loaf.... arf, arf, arf..
Barry, this is your only opportunity in these forems to rant at millionaires like myself.Be careful
not to rant at Charlie Rangel at the homeless center.He`s given you everything you`ve got.
3 hots and a cot,that is.
Good luck getting Twit, Brent....
Think I'll pass even if I do have a chance at getting it....
and come inside for TV time. Its a good thing her portfolio
is up 130 percent !!
Ciao for now.....
Re-TOG:I`m thinking of buying some edf.It goes ex-div on Nov.6th.It pays monthly.1000 shares
pays $180 monthly.I`ll accept all checks anytime.
Barry,Now you want to sell a bridge.Just like a Repub.Trying to sell something you don`t own.
Your butt buddy would have sold it to China if elected.Thank God most Americans are smarter
they were told that retards couldn`t they cried and cried."
So you were born out of wedlock then Little Beav.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.