Stocks are cheaper than they appear

Leading names like Boeing and Caterpillar are bargains if they can deliver on their 2011 forecasts.

By Jim Cramer Nov 23, 2010 9:33AM

jim cramerIs the market expensive? No. Are there cheap stocks? If you don't think that JPMorgan (JPM), Goldman Sachs (GS) and US Bancorp (USB) are cheap, you are nuts.

 

The whole industrial complex that is Boeing (BA) (presuming Dreamliner in 2012), Caterpillar (CAT), Eaton (ETN), United Technologies (UTX) and Emerson Electric (EMR) isn't expensive if the companies deliver on their 2011 forecasts. And I think they will do far more than that.

 

The coals and the oils are dirt cheap. The retailers were cheap going into last week, but they have made a move and can be considered fairly valued. Tech? I think the analysts aren't factoring in anything that Tech Data (TECD) said Monday. It is at historically low multiples. Drugs? I can't believe you can buy an Abbott Laboratories (ABT) at such a huge discount to its growth rate.

 

And then there are the FADS CAN stocks, which are right in your face and as expensive as all get-out. That's where Mr. Marcin in his "Speculation" piece is dead right.

But the rules of money management and the rules of valuation cross swords at year's end, and no one seems to care at this moment that Salesforce.com (CRM) (the "S" of FADS CAN) is now trading well above 100 times next year's earnings. All of the FADS CAN stocks, with the exception of Apple (AAPL) and Deckers (DECK), represent extreme nosebleed valuations. I am excusing Apple, because I think it can earn $22 next fiscal year, and Deckers, with a multiple of 18, trades well below its 25% growth rate.

 

But Marcin is right on the rest.

 

I just think we have to look at two tiers of a market. The big-cap stocks for the most part are not expensive. Some Russell 2000 names are stretched, for certain. But the real speculation is in the names that growth mutual funds must own, and that can be chalked up to the typical extremes that we have all come to expect from year-end Yuletide trading.

 

At the time of publication, Cramer held AAPL, JPM, BA and ABT.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

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3Comments
Nov 23, 2010 12:27PM
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Cramer also said Lehman Bros. was an outstanding buy mere days before it's collapse.  If you take advice from this bozo, you deserve what you get.
Nov 23, 2010 12:03PM
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Nonsense !! All the big banks are insolvent without mark-to-fantasy. They make their earnings what they want them to be by tinkering with loss provisions.

 

Cramer knows this......he can't possibly be talking a straight game.

Nov 23, 2010 12:53PM
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With the financial situation we are in no stocks are cheap. Home prices are headed way down, I am in this field, Way down. With food prices going up, utilities going up, the American consumer is seeing their purchasing power go away for ever. Something huge will have to change for it not to continue to happen. The rich are getting richer but 98% is getting poorer, and the wealthy want us to pay their taxes accept for Warren Buffet, The Koch brothers want no taxes even though they are worth 21.5 billion each, corporate welfare queens all of them but Warren Buffet.

 I agree with the fact Cramer is just a patsy for corporate America.

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