These sectors are seeing phenomenal moves

From airlines to tobacco to pharma, stocks are seeing rare rallies for no apparent reason.

By Jim Cramer Mar 5, 2014 12:47PM

Sometimes these moves really do take your breath away.


Tuesday we had rallies in a couple of segments that were nothing short of stupendous. The first is in regular pharma, specifically the central-casting, don't-worry-be-happy stock of Bristol-Myers (BMY). TheStreet.com logo


You know I love Bristol-Myers, but how the heck was that stock up 5 percent in one session? And why wasn't it even noticed? What was that about?


I think it had so do with the fact that Bristol-Myers is beginning to trade like a biotech stock. In fact, Tuesday it beat the performance of most biotech stocks as it laid out its lung cancer plans at a Cowen analyst meeting. I didn't find anything that revelatory, yet that's really the point. It didn't need to in order to jump 5 percent. When you re-rate a stock from traditional pharma to biotech, as BMY is being re-rated, you are going to get these kinds of moves.


Meanwhile, Johnson & Johnson (JNJ) was no slouch either. And believe me, it's been one. Tuesday it rallied on a new heart device as well as some good chatter about a schizophrenia drug in a European health magazine. Again, this is not the stuff of a 2 percent increase, but you got it Tuesday. That made it worth owning after all.


Meanwhile, Merck (MRK) just keeps rallying and Pfizer's (PFE) on the move, again with no real reasons. Sure, for the last 10 points Merck's been breaking up. Pfizer is doing new tricks with old anti-cholesterol dogs. Still, nothing happened that merited these moves. Believe me.


This is an odd move into the non-cyclicals and it's been going on now for a week as it appears that some people are making gigantic slowdown bets, hence the moves in the non-drugs like Kellogg (K), General Mills (GIS), Hershey (HSY) and Kimberley-Clark (KMB) that you typically do not get in a single day, especially with the first two, given their subpar quarters.


It's almost as if there's this gigantic the-world-is-slowing ETF that a bunch of gunners piled into to get instant exposure to the group and turned the individual stocks into a one-day juggernaut.


But does that make any sense at all when you consider that Tuesday's other red-hot group was the airlines? Forget a possible slowdown. This group should have been killed by the weather and by higher jet fuel prices and by the not-so-hot numbers reported by United Continental (UAL).

Nope. Momentary pause and then another leap forward!


My three favorites, Delta (DAL), American (AAL) and Spirit (SAVE) all hit 52-week highs Tuesday. Do you know how amazing that is? These are airlines that have lost thousands of flights to the weather and just keep delivering.


I know from Twitter that people continue to have one foot out the door in the group. I reiterate that, while they are certainly more elevated than when I started pushing them, they are not expensive. The best, American, is selling for nine times earnings. Everyone's loath to give these a price-to-earnings multiple of any decent size, but that will change when the cash piles up and the dividends and buybacks get humongous for Delta and American. That's what happens when there is no competition.


Plus, travel continues to boom. TripAdvisor (TRIP) was the biggest percentage gainer in the S&P Tuesday. Of course Priceline.com (PCLN), a momentum monster, roared higher. It always seems to on these big up days.


Speaking of places that are rallying where there aren't supposed to be rallies, how about the endless rallies in these remaining tobacco stocks -- Reynolds (RAI), Lorillard (LO), Vector Group (VGR) since the year began? Tuesday was just another day where they went up on both takeover chatter and e-cigarette developments. They aren't growing like weeds, as we see with these pot drugs, but the runs are pretty stunning from these once-sleepy stocks.


Finally, the brokerage stocks seem to have been anointed as if we are both going to see more money into their coffers and higher short-term rates. We haven't really seen either yet, but Schwab (SCHW), eTrade (ETFC) and Invesco (IVZ) are all on the run. Is the individual investor really back? The stocks said yes on Tuesday, in keeping with the all-time highs we're hitting on many indices.


These are phenomenal moves for stocks that aren't supposed to have them. They are one of the reasons why the bears just keep being overrun. They are a sign of raw power, power that's based on earnings, on multiple expansion and on a sense of optimism that, at least Tuesday, certainly panned out.


Random musings: My friend Eric Oberg has penned the single-best, most-honest piece about Bitcoin and you have to read it to understand why Warren Buffett's going to be right when he says it might not exist a dozen years from now. Eric, late of Goldman Sachs, has done fabulous work before on financial engineering gone bad. This is his best!


Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long JNJ.


Jim Cramer



Jim Cramer's Action Alerts PLUS: Check out Cramer's multi-million dollar charitable trust portfolio and uncover the stocks he thinks could be HUGE winners. See it FREE today!



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2Comments
Mar 5, 2014 2:33PM
avatar

Tobacco stocks have  done exceptional over the last several months...years.

Pay great dividends and even have growth factors or spurts.


If you are squeamish or moralistic about owning tobacco stocks...

Compare them to Defense Dept. contractors or Military Industrial Complex..

Fast food Companies...

Pharmaceutical and drug, companies that sell more lethal products.

Weapons, Guns, knives and ammo manufactures..

Alcohol and beer makers or breweries and retailers, along with restaurant companies that have bars..

Food processors...

And others that produce or manufacture anything that might harm you or yours.

Just sayin'.

Mar 5, 2014 1:27PM
avatar
Pretty good summation Jim.  Nothing to argue about.  How long can the supply siders continue to ignore consumers lowering incomes and expanding Guberment debt?  Like the old song says somethings got to give. But with less and less competition and relatively no inflation pressure this could go on for some time. Eventually can be a long time coming. Income deflation will eventually overcome pricing power and only then will profits ebb down.  This may occur sooner than we think but with the FED in control of the process who is worrying?.
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