The return of old-style investing

The aerospace move and the short covering are reminiscent of bygone days.

By Jim Cramer Jul 12, 2013 9:42AM

thestreet logoStocks circled in newspaper (© Digital Vision/Getty Images)This aerospace theme won't quit.

 

When oil goes up, the sector does well because the airlines will need more fuel-efficient planes. When oil goes down, people think the airlines will do better and therefore place more plane orders. In the absence of a trend in rates -- and we don't know the trend -- it has become the de facto trade, and aerospace is even better than biotech and high-growth retail like Starbucks (SBUX).

 

One of the amazing things about this market is the intense and relentless run-up of the same stocks on the same news. There is no per se news about aerospace. We just keep getting more orders, and it will keep happening because of the fuel-efficiency issue. But when is it built in? When does Boeing (BA) discount it? Right now, the answer would seem to be never.

 

What I think is happening is we are seeing a return to some old-style investing. Boeing used to trade in seven-year cycles. A new '87 entry would give Boeing seven long years of profits with terrific gross margins, ones that get better every year. That's precisely what it seems to be happening right now, doesn't it?

 

That means the discounting mechanism has gone awry.

Plus, the current crop of analysts just aren't used to a market this bullish. They, collectively, don't want to hype Boeing, because they fear top-ticking it. In fact, the only stock that analysts don't seem to be afraid to top-tick is Google (GOOG). Before that it was Qualcomm (QCOM), and before that it was Apple (AAPL), although I think Google is better than those two.

 

It's just that the bullishness is so pronounced that they can't get their arms around it.

 

Plus there are tons of stories out there that people are short, and they seem to be short/cover/short/covering every time.

 

Take Amazon.com (AMZN). Periodically someone says something good about the stock, but we're much more likely to hear the stock is overvalued. How many people are short that?

 

Then there is this pattern, too. You will have a couple of days when winners like PVH (PVH) and Netflix (NFLX) are weak. That brings in the short sellers. Then something positive happens and the shorts spend the next day or two scrambling. Again, constant pattern.

 

That, too, is reminiscent of the 1980s and '90s, when the bears simply couldn't believe the moves and so shorted them out of disbelief.

 

Disbelief is a terrible reason to short something. And that's exactly what's generating a lot of these moves.

 

cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long AAPL.

 

 

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86Comments
Jul 12, 2013 11:17AM
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I buy quality companies like Coca Cola and Exon, a bit heavy on utilities, consumer staples, and health care, but generally keep about 10 % in each sector, but light on technology and the financials and telecoms.  I aim for the dividend and only buy when the sky is falling and the mood is negative. The bigger the panic, the better I like it for buying.  Since I started doing this, I have averaged around 10-15 % a year and 4% average dividend.  I rarely sell.

The most "old fashioned" investor in the world is an 80-something man named Warren Buffett.  I wish I had started being "old fashioned" when I was young.  If I can keep going until I am Mr. Buffett's age I will have a very nice nest egg and legacy, but if I had invested this way when I was 20-soemthing, I wouldn't have to be working now.  
Jul 12, 2013 11:16AM
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Cramer ---"Buy Gold at $1900..."   ....says it all !!
Jul 12, 2013 10:36AM
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DOD is already war mongering again complaining about the Chinese missle program.  The Chinese will not have to fire a shot to beat US.  All they need to do is ignore the silly US legal system of patents and trademarks and build their own ecosystem while dumping US debt to raise are interest rates to unbearable levels. They'll beat US just like we beat the Russians - economically.
Jul 12, 2013 10:36AM
Jul 12, 2013 11:15AM
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What absolute meanlingless garbage ......

Cramer why don't you write about your paltry returns at action alerts plus over the last 12 years.

Also why don't you write about which "charitable organisations" have benefited from donations that you claim to have made?
Jul 12, 2013 2:07PM
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New style investing?  Old style investing?  I only know one style of investing.  Invest the same amount of money bi-weekly or monthly.  Invest in low cost mutual funds, compare the fees.  Diversify between stocks, bonds, and cash.  Take advantage of dollar cost averaging.  Invest for the long term, and don't invest in the flavor of the week.  Buy a house, live well below your means, and don't forget to start a family.  This is how you create wealth, it takes a lifetime.
Jul 12, 2013 10:20AM
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Maybe some of that "old tyme" investing never left...

 

Not everyone has a HFT Platform running on their Home PCs...

 

Only guys/gals like Regal Man(?) and Mr.Fat Cat (?) can afford those luxuries.

Jul 12, 2013 1:03PM
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Old style investing moves are NOT back!  Look at UPS, they are a pretty good economic barometer and their recent forecast for the US economy is pretty dismal.  In the old days, this would be a fairly strong warning signal for things to come.  But just like a poor consumer confidence showing, a poor improvement on the jobs front, a poor small business optimism, etc..;  now the old-style approaches and indicators and fundamentals don't matter, because QE trumps everything else.
Jul 12, 2013 12:32PM
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"Yes they are. JPM reported a 31% jump in profit."

 

Think this one through, America. This bank has a direct conduit to borrowed funds and a pretty stupid blanket credit buy-back program. They are an immediate recipient of Ben's $85 billion monthly QE. Yet... they can't lend right, they screw up in billions, invented- then were victims of their own derivatives and debt contracts! Through the 20th Century, it had the US Government bail it out FIVE times and accepted TARP monies in the 21st Century. JP Morgan is directly responsible for the Federal Reserve Act, which passed with only 4 (GOP) members of Congress in session, after hours. The 31% is based on a massive loss in difference... so... in spite of every odd in it's favor, JPMorgan Chase did really poorly and begs the obvious question... if you truly are doing well JPM... then you should be bribing Congress to end QE, right? Your aren't a bank, JPM, you're a blank check for corruption and the sooner we get to eat your executives and directors and shareholders, the sooner others will get it about financial tyranny in America.

Jul 12, 2013 1:01PM
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Little Beav makes an indoor pool every time he sees his shadow.
Jul 12, 2013 11:28AM
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I remember when Cramer top ticked Apple around $700. In fairness, he wasn't the highest call at the time. But, there were a lot more analysts who got it wrong than right. And, even fewer who got it right made any money by putting their money where their mouth was.
Jul 12, 2013 12:53PM
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If you really want to radiate wealth buy yourself a Buick Regal.

 

At least its not a chick car Beav.

Jul 12, 2013 1:24PM
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I have trouble reading, re-reading contributions, that continually repeat or are repititious of the same agenda on a weekly or some bi-weekly basis...

We have a few posters, that suscribe to the that mantra...

And going into Political forays or rants, seldom holds my attention for long in any conversation anywhere....

I would rather sit and drink my whiskey quietly, and chat about the weather, crop yields or the price of hog bellies...Maybe even argue about Israel or the Middle East..

The name calling or inuendos in jest are tolerable, but then again some can just be clicked or rolled on by...

 

Life is too short, to punish yourself and others with droning on about what is,was or could be..

As you get older that realization comes into play, and sometimes it's not worth the trouble to listen or complain.....But just start whistling or singing under your breath or in your mind.

Que Sera, Sera.

Jul 12, 2013 2:25PM
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Well I won't be posting much for the next few weeks, I work in insurance restoration and between Calgary floods and now the Toronto flood (which is not getting much press but is going to end up being much more expensive then Calgary) I will be out of town for a while.  Hope the market is higher when I have time to pay attention to it again.  Enjoy the summer all.  
Jul 12, 2013 4:46PM
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What kind of man knows Halle Berry is getting married this weekend?
Jul 12, 2013 12:22PM
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Girlie man(?) = Girlie Car

 

har,har,har, me swabby.

Jul 12, 2013 3:12PM
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Fatty Cakes, did you call me a name, did you call me a name....Think it was Racist, Buckwheat really Buckwheat?....What ever gave you the opinion I was Black..??

 

I don't call you bery leetle yallow man, that's the another guy.

And I didn't vote for Obama the first time he ran...

Then you wish me and other's to die...

 

That not bery nice, leetle yallow man.

Jul 12, 2013 12:09PM
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Troubled Times...Kinda surprised if you are an investor leaning towards buy and hold along with searching out good dividends....; That you don't have some good selected Telcoms in your Portfolio.

VZ and T come to mind..I'm sure there are others, maybe even better...We hold FTR, but the depreciation has taken some toll.

Other staid and solid payers are in the Tobacco Sector...

But it also looks as if you prescribe some to Buffet....Think KO is his number one holding.

But I always relate he and Munger did this over about 50 plus some years and did it fairly well..

 

The problem with us or people like us, is we had to work for a living and support other endevours,

And had other obligations...Whereas they had been doing their Berkshire thing over a lifetime.

Good luck and good investing, you should do fine.

Jul 12, 2013 3:44PM
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I don't know where any of you, are getting this opinion about "old style investing" is dead; Including Cramer...

Warren Buffet/Charlie Munger still do, Re-Toggy still does, many Commentors on here along with several other big players and Millions in 401Ks and the like...

Some of you are just full of shidt, or are not investors at all..

 

Granted, do you have to make adjustments, re-allocations and re-investments to get further ahead?

The short answer,would be yes...Most do... We alone do about 100-150 trades per year.

Small potatoes in the grander scheme of the investment Game..

401K'ers do have less choices so they are kind of locked in for the most part..

Mutual Fund managers do their part and have 7-15% churn in some cases, maybe more? I don't know the stats at this time.

 

Are there HFT traders, daytraders, scumbags and manipulators in the Markets, again the short would be yes...But Worldwide the Markets are in the Multiple Trillions...

And those Trillions are not moving everyday, to find new homes...

So get off this bullshidt, you included Cramer !!

And let's look at the "Bigger Picture" 5-10-20 even 25 years out...Yes, this is my Rant for the day.

Jul 12, 2013 1:44PM
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Wasn't the answer to that question, it pertained to your statement about reading V_L and maybe other's incessant ramblings...

You are just to quick for me and I was doing some duties out in the kitchen....

While formulating a "statement" not a "rant"....I Do some of my best work in the kitchen or bedroom,har,har.

 

I call it like I see it, on a Forum or Article that's suppose to be about Investing, and not a Political sounding board...

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