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.
In a letter to congressional Democrats, the inspector also said that 100 percent of Tea Party groups seeking special tax status were put under IRS review, while only 30 percent of the progressive groups felt the same pressure.
The Wednesday letter to the top Democrat on the House Ways and Means Committee punched a huge hole in Democratic claims that progressive groups were targeted as much as the Tea Party groups from May 2010-May 2012, the height of the Tea Party movement.
The letter from the Treasury Department Inspector General for Tax Administration revealed that there just weren't many progressive groups who even sought special tax exempt status. A total of 20 sought it, and six were probed. All 292 Tea Party groups, meanwhile, were part of the IRS witchhunt.
"As we gather the facts, we will follow them wherever they lead us. Chairman [Rep. David] Camp encourages all groups, regardless of political affiliation, that feel they may have been targeted to come forward and share their story."
Democrats had noticed that the word "progressives" was on the so-called Be On The Lookout, or BOLO, list. But the Treasury IG suggested that the list wasn't used.
The operative paragraph from the IG letter:
"Based on the information you flagged regarding the existence of a 'Progressives' entry on BOLO lists, TIGTA performed additional research which determined that six tax-exempt applications filed between May 2010 and May 2012 having the words 'progress' or 'progressive' in their names were included in the 298 cases the IRS identified as potential political cases. We also determined that 14 tax-exempt applications filed between May 2010 and May 2012 using the words 'progress' or 'progressive' in their names were not referred for added scrutiny as potential political cases. In total, 30 percent of the organizations we identified with the words 'progress' or "progressive" in their names were processed as potential political cases. In comparison, our audit found that 100 percent of the tax-exempt applications with Tea Party, Patriots, or 9/12 in their names were processed as potential political cases during the timeframe of our audit."
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.
A broke one at that., only LOOOOOSERSSSSSS leave thier hometown for LV.
Eating $3.00 buffets breakfast , lunch and supper.
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.
Remember yesterday your rant o how the IRS went after ALL groups, NOT just Tea Party, Conservatives
SURPRISE - WRONG AGAIN !
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.
The economy is turned around ?
Really ? LOL
Tell that to the 50 million on foodtamps
Unemployment is still almost 8% - LOL
For any recovery you need no more than 4%
No jobs out there unless it's min wage. Gas STILL almost $2.00 higher than Day one of Papa Doc Reign
14 Million on disability per year - 250,000 per month
Wait until Obuma care kicks in - paychecks will shrink big time
Yeah, it's all "recovered " now
What a tool
He MUST be paid by Acorn or some other prestigious organization , no one could ever be that dumb ?
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