Investors playing a dangerous game
Tech Data's post-earnings collapse is a cautionary tale -- that, or a buying opportunity.
It's difficult when we all know it's too high, isn't it? Come on, admit it: You know it's too high as well as I do. You want to buy a household name? I can't think of a reason you should besides, "They keep going up!"
Welcome to the world of the new bull market, in which stocks of all shapes and sizes and sectors break out to unprecedented and unproven levels. Welcome to a world in which the consumer packaged-goods stocks trade like the tech stocks of old, where all that matters is that they have a pulse and seem to be doing OK.
I find moments like these so daunting, because I sit here trying to find stocks that are cheap vs. the fundamentals, and I have to fall back either on stocks of companies I know aren't doing that well -- like Target (TGT) -- or on stocks that might do OK if the world gets better, notably in the tech space. But take a look at how Tech Data (TECD) did Monday, and you will see how hazardous this game is.
Tech Data reported a terrible quarter before the open Monday. Not only did the company miss, but it actually came out and said things could get worse, given that a replacement cycle is going on, from servers to tablets and smartphones. That means the company's own inventory is mismatched with the demand.
I read it and I said, "Oh man, this is terrible -- especially when you consider this tech supermarket has a history of doing it right, not wrong. This change from a high-margin to low margin business is happening so fast that it even smoked Tech Data!"
But the stock opened down and then actually proceeded to rally, and at a certain point it was only down a buck from where it went out Friday. I thought to myself, holy cow, maybe nothing matters!
Then, as the market shook off the Eurasian futures and started to rally, Tech Data fell apart before our eyes and ended up down $4.43, just a hideous outing. Now, here is what's really remarkable about the Tech Data journey. I have no doubt in my mind that, if Tech Data hadn't reported Monday, it would have been up huge. Why not? You could certainly develop a thesis that says, "Look, how long can tech really stay down? Don't I have to buy Tech Data before it has an Avnet (AVT)-style run?"
Come on, you know that's what would have happened.
Yep, it's just so hard to find anything that hasn't already exceeded your price target, maybe even a long time ago. That except stocks that are sent down -- and perhaps dramatically so, as with Tech Data -- if we've heard from the company that day.
- Also see: 'Mad Money' recap: focus on the positive
My take, if you still want to play: Look for stocks that haven't done anything, or have pulled back, despite excellent numbers that the companies merely had the misfortune of reporting during one of those Italian Job days.
I know -- that leaves slim pickings. But what can I say? We are truly in rarefied territory, where the best we can hope for is that our companies don't talk, lest they tell the truth -- like Tech Data did -- that business isn't so hot after all!
Of course, there could be ultimate irony here. As the credential bear Doug Kass says, this market has no memory from day to day. Who knows? Maybe Tech Data is a buying opportunity!
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 has no positions in stocks mentioned.
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Death: The people rise up and destroy all pariahs.
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The stock market is not a representation of the economy or an indicator of it's health, it is an indicator of the health of the companies listed on the stock market, nothing more, nothing less. Companies are doing far to well for a 50% correction, period. Thumbs down me all you want I know this discussion board has become a competition of who can have the most dire prediction but it's just not in the cards. Japan has huge debt and slow growth for years and what do you know it's people are not burning grass for heat and eating rats for survival. I've enjoyed the recovery in the stock market, I may very well take profits this week and revisit my portfolio, but this end of all times crash you all think is imminent is not in the cards today, sorry to break it to you all.
CAN anyone out there say
Pretty much it's Bernnake free money boosting up the stock market and when the Federal Reserve lose's it's world reserve currency position to China later this year the fall is going to be huge.
Here's the Deal....We have had these highs before and will again...imo
To think it took 6 years, lets put that in perspective...Hmmmm??
We HAVE HAD a terrible RECESSION for about 6 YEARS !!!!!!
Well we do have some history of the market correcting to the down side in a massive way. The dot-com bubble. Some here believe the QE money has created a similar market. If that is the case then the possibility of a bigger than 10% correction is likely when it happens. JMHO
There's no question, the market is in a huge rally right now. We can debate and pontificate about what the rally is based on, but it's still a rally, no matter how you look at it. There's no telling how high it might go or how long it might last, but history tells us it has to end sometime. The question becomes, how big will the correction be. We could be looking at 10-15% or we could be looking at 50% or more. Either way, we've probably reached the point where, if you haven't done so already, it would be prudent to quietly start moving to safety, even if that means cash. If you've been in it to win it, you should've already won. Claim your victory and protect your spoils. Failure to do so will have you kicking yourself for years to come. Remember, "Buy! Buy!" can and will turn into "Bye-bye!" in a heartbeat.
Well once again Brutus, the Chicken eggs aren't falling out the sky, killing the Chickens..
Saying the "possibility" and then "could be" are ONLY Redundancy in sematics...
So you either think it can/could be a 50% correction or NOT.
Like I've said and it is, SERIOUSLY; Damn few are making a call anywhere near that..
I have mentioned the possibilty of a 10% correction and will stick with it..
Not some WAG that no one but non-market watchers are throwing and a few Crazies that want to sound like they have the inside track..??
Say it long enough.....AND SOME YEAR it MIGHT HAPPEN ?
We had a Financial Collapse of the Banks and Housing went to hell for specific reasons, back in 2007-2008, this is not 2007-2008.
Housing is somewhat correcting itself, jobs picture is looking a little bit better for the time being.
And Banks are FLUSH with cash..Although they do have a "shadow inventory" on their books..
I'm well aware of some of our "pitfalls", but am not enough of a Pessimist to say we are headed towards total failure again...
Yes I treat it very serious, because I am an Investor and a Retiree..
Spooker...You only have to look towards the Rich, Elite, Large Corporations and the Banks..
THEN YOU WILL SEE THE PROSPERITY....
Although on the flipside of all that, you will see the DISPARITY between the other Classes.
Ahhhhhh, there it is..
Your suggestion is a good one....Taking some money off the table to cash..I can concur.
I'm not going to say we doubled our money in the Markets....But that all depends from whence we came....
Anyone that hasn't "more then" doubled since the "bottoms" of end of 2008 or spring of 2009...
HAS REALLY MISSED THE BOAT...
So yes it would be very PRUDENT....To maybe take some of those PROFITS to cash or safe instruments..
It all depends on ones Avenues of Investments, their mindsets and what they are willing to, or can invest safely....That agenda, I AM IN TOTAL AGREEMENT WITH...
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All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
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