How to play this baked-in sell-off
The violence in Libya is weighing down stocks, but it will not ultimately harm the earnings of many companies.
I never like these weird days off, when we are gone and they aren't. But I particularly don't like them now, when the books are all one and the same -- so, basically, we have to get Monday's hammering plus Tuesday's hammering.
There are two ways to approach this kind of baked-in sell-off. You can decide that it is just the beginning of a larger downward slide, or you can make a bet that things will get better and pick your opportunities.
My instinct during this period is to err on the side that it is baked in and that selling now would mean locking in losses from Middle East unrest that, most likely, will not harm the numbers of most of the companies I want to buy. It will hurt the consumers of oil, but I don't want those anyway.
So I take the "beginning of the end" off the table.
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I then look for special situations, such as shares that might be dragged down by futures even though they shouldn't be. Maybe Southwestern Energy (SWN), which most closely resembles what BHP (BHP) bought from Chesapeake (CHK). BHP purchases acreage in Fayetteville, SWN is dominant in Fayetteville, and a back-of-the-envelope evaluation says that SWN should be worth at least twice what it is currently valued at just on its Fayetteville assets alone.
Or you can buy one of the industrials that people think will be hurt by the Middle East tumult but most likely won't be -- maybe Caterpillar (CAT) or Joy Global (JOYG) or Terex (TEX) or Manitowoc (MTW).
Or you can buy one of the regional banks that will simply be pushed down by futures as they always are. Or a tech connected with cell phones or server storage. They will work, too.
And if it keeps going down? Then you keep picking, because the thesis -- that ultimately these uprisings will not impact earnings per share -- remains intact.
At the time of publication, Cramer was long Southwestern Energy and Caterpillar.
Follow Cramer's trades for his charitable trust.
Market's looking for an excuse to correct, Unemployment, Home Prices Failing, Oil Up, It's May Sell, Riots in Wi, Spring, States Bankrupt, Summer, it don't matter, take some off of the table until it corrects 5-10%
always late to the party...
"no inflation"...U gotta be shirting me...corn,oil,wheat,sugar,plastics,rubber...hitting all time highs...
have u thought about getting into the commodity business...??
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