Cramer: Demand Lifts Defense, Aerospace, Cyber-Security, Regional Bank Stocks

 | Oct 26, 2016 | 4:19 PM EDT
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What's driving higher the stocks that are working in this market? What are the secret sauces behind the propulsion? And what's causing some stocks to plummet even as it looks like, on the surface, nothing's wrong?

These are great questions for the moment given that we are in the most intense days of earnings season and snap judgments are being rendered and then re-rendered on the fly in what is an insanely difficult moment.

How insane? Before we delve deeper, consider the stock of Boeing (BA) , which has spent tons of time in the wilderness after a very long period of outperformance. This morning it guided up on both earnings and revenues and the stock launched four points before the opening. Then the company told you that some part of the enterprise, namely wide bodies, which has soft sales in "mature wide bodies," and the stock plummeted six points, but then when it made it clear that the demand for narrow bodies is off the charts the stock snapped back to where it was in the premarket.

So look at the arc: Guide-ups that are accepted, then challenged, then accepted again -- all within two hours' time.

But the signature reason why the stock's climbing?

Demand. In the end Boeing explained that there is tremendous demand for its overall product line and that's long-term demand. The cycle is intact.

Yes, demand is, right now, the No. 1 reason that's driving stocks higher.

Same thing goes for the launch of the stock of Akamai (AKAM) . You may not know Akamai, but it is a content-delivery system that is used by many companies to send streaming presentations over the internet. Until today many investors thought this was a commodity business. But the essence of what Akamai talked about on its call, right up top, was the need for a secure network. In a time when cyberterrorism is running rampant, at a time when even Preet Bharara, the whipsmart U.S. Attorney for the Southern District of New York, admits that the government is behind the times on cybersecurity, it's a better thing to rely on a secure network rather than on an unsecure one. Hence the magnificent nine-point gain, one that is reminiscent of the triumphant run in Proofpoint's (PFPT) stock when it recently saw its surge in business because it keeps email secure.

Or how about the gigantic gain in the stock of Northrop Grumman (NOC) ? There is off-the-charts demand for defense gear not just from our country but from around the globe. And Northrop's following the pattern established yesterday by Lockheed Martin (LMT) , which revised guidance up huge.

How about one that's a little harder to gauge? It looks like there is stirring demand for money, that's right, money that is lent from banks. We heard that yesterday from Beth Mooney, the CEO of Keycorp (KEY) , and we heard it today from Huntington Bancshares (HBAN) . The Regional banks remain a terrific place to go.

Okay how about the flipside? Who doesn't have demand? I think there are some possible opportunities here, but let's begin with the Edwards Lifesciences (EW) , which has the breakthrough heart device that allows doctors to perform important heart surgery without having to crack open the chest cavity. This company has beaten numbers and beaten numbers and beaten numbers again. You know how that works. You saw it with Ulta Salon, Cosmetics & Fragrance (ULTA) , the cosmetics company. At a certain point the analysts figured out the game and just took numbers up where they couldn't be crushed any longer. Does that mean demand has slowed? For some aggressive money managers the answer is a resounding yes. The combination of the sharp decline in Edwards Life sciences and the actual shortfall in the earnings from NuVasive (NUVA) , which markets surgical spine treatments has caused people to run from everything device, including Abiomed ABMD, a cardiovascular company that reports tomorrow and DexCom (DXCM) , a diabetes monitoring company reporting next week.

This group's been overly punished but until some company stands up and bucks the trend I see this group, including Zimmer Biomet (ZBH) , Stryker (SYK) and even the much loved Medtronic (MDT) , Becton Dickinson (BDX) and Baxter International (BAX) , remaining in the doghouse.

The airlines are a tough call. I had been building a thesis that demand is going to become more positive in 2017 and that's been a winning theory that has been driving the stocks until Southwest's (LUV) Gary Kelly lowered the boom this morning and said that he sees passenger revenue miles headed down 4% to 5%. Southwest's the most reliable in the group, but I found myself thinking don't give up the airline ship especially United Continental (UAL) , which is becoming a most-improved airline under new CEO Oscar Munoz, and Southwest's issues are giving you a chance to buy UAL on a dip. In fact, I reiterate that the group should be bought and it's important to note that Delta's (DAL) stock didn't even go down after Southwest's warning.

Here's a tough one. Is there enough demand for sportswear apparel? Some of my favorite companies' stocks have been crushed during this period, including both Nike (NKE) and Under Armour (UA) . Kevin Plank the CEO of Under Armour came on my friend Scott Wapner's "Halftime Report" and told a story of having to spend money to keep up sales and that's being flagged as a problem in demand. I think the real issue is that you have a battle for share among three crafty players, Under Armour, Nike and a renewed Adidas and no one wins on the battleground except the arms dealer. My conclusion: Buy Footlocker (FL) , which is a pure beneficiary of the suppliers' nightmare struggles.

Finally, let's talk about Action Alerts PLUS holding Apple (AAPL) , which is the elephant in the room. Elsewhere I talk about the shoddy way I think the analysts treated CEO Tim Cook last night, questioning the companies' growth strategies, actually asking in several different ways if it even has one. I think that the most important issue on the whole call, the one that seemed to elude all of the analysts, is that demand is greatly exceeding supply. I take Apple at face value and I think you should own it and not trade it because its products are loved, the stock is inexpensive and it has a growing service stream that, within a year, will be visible to all as another reason to step up and buy the stock.

The antipathy ran deep, though, oddly among many analysts who are actually recommending the stock, so it might take another day to settle. I know if you listened to the call the analysts' questions implied a boatload of reasons to dump the stock. Let me just say for the record that they had the same objections twenty points lower and where did that get them and more important where did it get you?

I know the answer. On the wrong side of the investment.

Oh, if I am going down the path of telling you what else is driving stocks I would be remiss not to mention that takeover talk is still a main driver. Last night Apple talked about doing a possible large acquisition. When you think acquisition these days you think about content -- thank you AT&T (T) with its pursuit of Time Warner (TWX) -- so once again Netflix (NFLX) runs on the theory that Apple can easily afford the $70 billion that I think it would cost to buy that company, lock stock and barrel. All I can say is that they weren't interested at $25 billion I sure hope they aren't interested now.

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