Some stocks are bright spots in slow-growth market
General Mills and others like it are perfect illustrations as to why.
We're getting this growing consensus from CEOs we talk to that the U.S. gross domestic product is on about a 2% growth path -- and maybe, if stretched, 2.5%. Now, no one in his right mind is going to say that's terrific. No one can be happy with that level of growth.
Except when you consider that Europe, where 38% of the world's business is found, would kill for that -- not to mention the envy people have in South America for that kind of growth. It is certainly true that China has faster growth.
However, we are in some weird moment when the deceleration from fast growth to slower growth is much more painful and disrupting than just permanent slower growth. The latter is exactly what the U.S. seems to be offering.
Within the confines of that kind of growth, you can see why there is something for everyone pretty much every day of the week. Just think about General Mills (GIS) Wednesday. Think about the life cycle of an earnings report. The day starts with a headline that says revenue estimates are disappointing. The stock gets hit down to $46 in premarket trading, even before we've heard from the company via conference call -- and anyone who has followed this company long enough knows that Ken Powell, the CEO, always puts on a good show.
So the stock starts its slow climb back up. Mills is the perfect microcosm for the moment, because as the news unfolded, it turned out there was simply no reason to sell the stock at $46. In fact, when it got to that level, it had a dividend yield of 3.25%. That's a bargain on a day when the 10-year U.S. Treasury is actually strong and yields are going down. Then, when the stock got to $47, you realized the company had already issued a pre-earnings report, and it was basically being its old conservative self as the headlines rolled out.
Then, at $48, you kind of had to say, "OK, there's nothing new here. If the economy were downshifting to 1%, it would be a buy, but if it upshifts to 3%, it's a sell." That's why the stock finished where it had started off.
We have a ton of stocks that are like General Mills right now. They have come back down to levels where they aren't cheap or expensive after they'd spent some elevated time as bond market equivalents. It is going to be hard to get them off the dime if the U.S. stays at this 2% range of economic growth.
But here is what's important about that: These stocks have reached some level at which, because of their consistency and their dividend policies, it isn't worth selling them either. I think the action in General Mills explains why the market has stabilized. With this level of growth, you simply no longer want to sell stocks that look and act like General Mills.
Certainly you are more attracted to cyclical stocks that could do better if you think the second half is going to give you 3% economic growth. That's why, when you get an upgrade of a company like Western Digital (WDC) or Seagate (STX), two uber-low-multiple stocks, you know you have winners. You are going to be drawn to companies like Boeing (BA), too. Wednesday night on "Mad Money," Boeing CEO Jim McNerney traced out a 20-year secular growth path for the company. That stock can go much higher.
But the main takeaway I can see here is stasis for the part of the market that had been falling apart. The General Mills-like companies out there -- with this Federal Reserve right now and this economic growth right now -- are just plain, well, hunky dory. They are clearly opportunities to be bought down a couple from where they are now, but they are opportunities to be sold if they climb back to where they had been before the Fed's May 22 signal that the economy's risk is now toward acceleration and not de-acceleration.
The Big G doesn't have the cyclicality the market craves, but it doesn't have the pitfalls the market fears. So there's nothing to do and, sometimes when there is nothing to do, it's a terrific statement for the market as a whole. Because this huge cohort just isn't going to hurt us anymore -- at least from these levels.
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 no positions in stocks mentioned.
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Gee Cramer the world's economy is still going down the Death Spiral of Lost Jobs and an ever weaker and weaker economy and you act like everythign is fine and that 2 percent growth is fantastic.
Pretty much Bernanke still pumping a $1 trillion dollars into the economy and the Federal government borrowing north of $1 trillion dollars a year and interest rates at zero
Should tell you that five years after 2008 that the US and world economy is still on death's bed.
Wake up and smell the collapse that is soon going to happen.
REPOSTED FOR THE NIGHT OWLS:
Fat Cat said:
["Florida? What a POS state. Full of Mexicans, Cubans, Blacks, white trash drifters, and Canadian Snowbirds.
If the economy is recovering, maybe they'll restart the White House tours. But, the last time I stopped there the door was locked.
REGAL....I didn't miss anything.....And you neither read well nor comprehend.
In 1965 I was fighting in a War....Berkshire didn't mean shidt to me.
In 1983 was raising a family, working and running a farm...Berkshire still didn't mean shidt to me.
You said 15 years ago a 10K investment in Berk would yield 1,000,000...
You do not calculate well either.
BerkB wasn't around, and don't think you could of only bought 10K of Berk.
Seems the SWest Sun has baked your brains...
And Berkshire still doesn't mean shidt to me..
Buying and selling based on government actions. A strange way to make money, but you gotta do what you gotta do.
buy and homework? looks like buy and hold for aa at 18...gold at 1900...aapl at 700.
few things are for sure.........following this hack's advice WILL lose you money FOR SURE
Barry, come to Morton`s steak house next Wednesday and ask for me.We`re having our
meeting in the afternoon.You wouldn`t know what in the heck we`re talking about.You`ld
realize then you`re not the sharpest knife in the drawer.
Buffet's Stock, Assuming you are talking about BRK.A or BRK.B, pretty hard to also accomplish your assertion about their increases in Value(FMV)
Don't believe BerkB was even around 15 years ago...Came about after they bought BNSF Railroad.
Because of my interest and or participation...B's lowest price has been near $45 or so over the years.
TODAY at about $113 and change less then a triple....Sooooooooo !!
BerkA hasn't been at much below $60K-70K in the last 15 years(maybe) and not really sure you could have ever bought a partial share or that small of an amount...Today's value about $170K.
So there certainly isn't any increase of a 10 or 100 bagger there either....
PLEASE USE BETTER EXAMPLES, I'm not real big on bullshidt stock prices...okay..?
Gregory you might get 10 different opinions here..
If you want 20 different opinions, and more knowledgable..Try going to kitco(dot) com.
It's the best site I know of for Gold,Silver and other precious metals...
Several authors and analysts commentary also...Spot prices and charts.
Silver is down like Gold right now, and some are saying a breakout to the upside..
PMs (precious metals) are near support levels on the downsides..
I don't deal with bullion or ETFs or other Funds...Sometimes a little coin.
Mostly just Goldminers and their stocks...We are down a bunch right now.
Check out Silver Wheaton or other silver investments, and maybe a dealer in bullion.
Do your research to be safe...Good Luck.
with gold at 1900 he said, "buy gold,every portfolio should have up to 20% gold "
this statement alone shows what a hack he is
Barry, the policy on food stamps is too liberal.That`s not Obama`s fault.I`m much better off.You
missed the bull market,that`s why you`re bitter.The Dow would be 5,000 if nut cases like
Romney took office.His history is to only look after himself and his rich buddies.You can
cry all you want about the IRS,etc,etc.If you were smart you`ld be enjoying the Ameican
dream like me.Get over and clean my pool!I`m paying $1.60 an hour.Just what you crybaby
Where are those sour puss bears that last week said the Dow was going down to
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