Cramer: Market Hasn't Checked Out of Hotels or Turned Off TV

 | Apr 03, 2017 | 12:07 PM EDT
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Why did Marriott (MAR) , Marriott Vacations Worldwide (VAC) and Wyndham (WYN) keep hitting new highs in the first quarter?

What's the story about CBS (CBS) and Twenty-First Century Fox (FOX) continuing to be strong in the face of what's supposed to be the end of the network as a place to make money?

I think the answer has to do with a belief that perhaps the internet isn't going to kill either group's bread and butter after all.

I recall interviewing Stephen Weisz, CEO of Marriott Vacations Worldwide, not long ago when the stock was literally almost 50% below where it had been. We discussed the absurdity that this best-in-class time-share company's stock was selling at 10x earnings with an 18% growth rate. Why was it there? For the same reason that Marriott and Wyndham sold at such a discount: Airbnb. That's right, the sense that no matter what they did, they would be overwhelmed by the popularity of the new way to vacation and that the business would never be the same again.

Turns out that Airbnb, as successful as it is, can't possibly meet the demand and certainly isn't nearly as big a threat as the marketplace thought it was. The bears had control of the dialogue, though, and they ran with it.

How about Fox and CBS? I think people figured they are just huge casualties of Google (GOOGL) and Facebook (FB) and Twitter (TWTR) and Snap (SNAP) and Yahoo (YHOO) and America Online, but we now recognize that only Google and Facebook really have any critical mass that could dent those two networks. (Google and Facebook are part of TheStreet's Action Alerts PLUS portfolio.)

They are effective ad media but they can't destroy television. In fact, in many cases they can't do the job television does because television has enough programming that must be seen when it comes on that you can't avoid the ads. Network television and even local television, if, for example, you look at the strength of Nexstar (NXST) , demonstrate a unique way to reach people that can't be duplicated by the web.

The cash flow from all of these offline companies is so strong that they have been able to buy what they want and buy back as much stock as they would like. Six years ago, Wyndham had 162 million shares outstanding, now it has 107 million.

CBS had 664 million shares outstanding and now it has 424 million shares out there.

These are staggering numbers. Just like the numbers of Time Warner (TWX) , which had 1.064 billion shares in 2011 and will finish its public existence with 783 million shares. Its disappearance will only heighten the scarcity value of the remaining television properties.

Why are these execs so aggressive in buying back stock? Simple. They were smarter, as I like to say, than the average bear as the bears constantly propounded the thesis that the internet would crush these companies. You can understand the thesis. The web destroyed newspapers, magazines and radio; television would be child's play. But as someone who has written for a defunct paper, newspapers were ripe for the picking. Dead trees from Canada, unionized workers, a product out of date before it hit your lawn. Just not economic when the web works so much better as a way to read and learn. But that was analog dollars going to digital dimes. Papers became uneconomic without a subscription business.

Magazines were pretty similar but they had been losing readers for years.

Many thought radio had more staying power, but the ads were too intrusive and horrendous; we plug in our Apple devices with our own music and we have Sirius for everything else. Better competition killed all but a few.

Television was always a much better medium and while there are indeed cord cutters galore out there, the numbers of viewers never dropped the way that newspaper readership was eclipsed.

The analog just didn't hold up. Now we know there are still plenty of people who want to bet against the networks because of cord cutting. But the bet's been a bad one. It's a simple issue: It still has the viewers and it still has the advertisers.

And the hotels? They still have the customers. Only overbuilding of hotels can hurt them, not the web.

It's an important allegory. For sure we have to be skeptical, but we can't be so close-minded as to laugh at the execs who may know more than we do about how their businesses are really faring because they see the order books, they know the numbers and they know how good sales and earnings really are. These could be the go-to place if we get a few more days like this one.

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