Don't give up the ship. Those may have been the dying words of the captain of the USS Chesapeake uttered during the War of 1812, but they could equally apply to this market on a day where too many people seem so quick to give up the ship.
Let me give you some classic cases in point of situations where people just got too bored or too antsy or too frightened to keep the ship afloat.
Exhibit A: PPG (PPG) , my favorite chemical company. The stock's been stuck in a rut because it hasn't done any big deals of late and because the paintings and coatings market's been just OK. I could totally understand your frustration if you sold the stock. But then what do you do when you see it rally nine points today because it is doing what you would expect PPG to do, which is talking to fellow paint maker AkzoNobel. PPG's market capitalization has grown over the years precisely by doing those deals. This is another one of them. Patience was rewarded.
Or how about Childrens Place (PLCE) , the children's retailer that, along with Foot Locker (FL) , has somehow triumphed over the mall malaise? We have endlessly profiled how Jane Elfers, the fantastic non-promotional CEO of Childrens Place, has been able to put up excellent numbers consistently even as investors and short-sellers keep saying this one has to be the last good quarter. Then today PLCE crushes the number, reporting high-single-digit comparable store sales, a doubling of the dividend and a huge guide-up for the year. (Foot Locker is part of TheStreet's Trifecta Stocks portfolio.)
After so much mall roadkill, you might have been tempted to think there's no way I can stick around with Elfers. This will be the quarter she is revealed as not being able to pull it off. So you gave up the ship and you left $18 per share in gains when you did so.
I was skeptical when we had H&R Block (HRB) on not long ago. The company had disappointed a couple of quarters out of the chute and they knew they were facing a more skeptical, some would say prosecutorial, Cramer. They didn't mind. They had launched a campaign with John Hamm, late of Mad Men, and then followed it with a no-fee advance loan product and a promotion allowing IBM's (IBM) Watson to help find deductions for you.
I don't know about you, but the confidence level CEO Bill Cobb manifested made me not want to give up the H&R Block ship, and sure enough, the company reported an extremely good quarter, driving the stock dramatically higher. Judging by all the hooting and hollering about tax reform, I think this is the beginning, not the end, of a big move. Washington's a tailwind that you want your boat to sail with.
We are staring right in the face of not one, not two, maybe not even three rate hikes but four of them if the employment number we get on Friday is anything like the number that ADP reported today. Remember, ADP can often foreshadow the Labor Department's figures and that means we could have as many as 298,000 jobs added to the rolls.
When rates go higher, we know banks go higher. I have seen so many people give up the bank ship that it's painful to see. To me, you get a stock like Citigroup (C) , which my charitable trust owns, and I think that with worldwide growth coming back, with its house all in order and with a terrific deposit base, will this stock continue to be stuck at $60? I am not asking for it to go back to where it was well before the Great Recession, but the fact is the stock is so far behind the rest of the group that a lot of people have given up on it and CEO Michael Corbat. I think that's a huge mistake. It's cheap with real earnings power and the ability to bring its dividend back to its old days if President Trump presses regulators to let banks do their thing.
Plus, if you believe in my worldwide growth theory, then Citi has the most leverage of all our banks to a turn in the global economy. It's breaking out here. I know many people who are saying, "At last, it's finally back to where I bought it, hooray, I am back to where I am even. So it is time to sell." That's what a lot of people said about Bank of America (BAC) at $16, $18, $20 and $23. Now it is at $25 and a lot of people are wondering they are going to get back into Bank of America. I say that ship has sailed, but you can still climb on the good ship Citibank.
Or how about Dow (DOW) and DuPont (DD) ? I did a call with Action Alerts PLUS club members who asked that now that Dow's finally broken out, isn't it time to take profits? I immediately launched into a discourse of how you ain't seen nothing yet. CEO Ed Breen, one of the toughest operators in the world, will soon combine those two companies and turn them into three growth situations that may produce wealth well in excess of this $63 stock. This merger came together in the $50s. It wouldn't be worth it if that's all the value that can be brought out. I don't like to chase, but DowDuPont is not something you should even be thinking of giving up on, not here, not now.
Someone else on the call wanted to know about giving up on Arconic (ARNC) . This is a tricky question. First, the stock's up huge from its bottom as Elliott Management has taken a big stake and is determined to unseat Klaus Kleinfeld as CEO. They have a slate of officers and a new CEO candidate who is well-known and respected in the aerospace industry, the key business of the old Alcoa (AA) . Kleinfeld, on the other hand, did precipitate the value-creating breakup of Alcoa and Arconic. (Dow and Arconic are part of TheStreet's Action Alerts PLUS portfolio.)
To me, one of two things is going to happen. Either Elliott is going to keep buying stock and win, installing its man who can generate some quick gains. Or Kleinfeld wins and his long-term vision comes into play. If all you are debating with in a stock is a long term versus a short term victory strategy, it never pays to abandon ship. Instead, if the ship looks like it is listing, given Elliott's excellent trade record of bringing out value, one that is actually shared by Kleinfeld even as this one's gotten quite contentious, then you don't bail, you buy more.
For many, there's a pattern of rotation here, where certain stocks fall out of favor or people lose interest and they just wither but don't die. The Clorox (CLX) , Colgate (CL) and Kimberly-Clark (KMB) stocks were withering until Heinz-Kraft (KHC) made its aborted bid for Unilever (UL) .
Right now the oil stocks are being abandoned with oil plunging to $50. Time to abandon ship? Hardly. This group's been crushed, obliterated, annihilated, on what? On some excess supply? I say not only should you not abandon ship, you should find one you like and dig in slowly, and wait for the next rotation to come back to you. It's not easy to find stocks that aren't near their 52-week high, stock that haven't had huge moves.
So you look at the oils. You find a good, one, a Chevron (CVX) or an EOG (EOG) , say, or some of the ones that we have been buying for the charitable trust, and you start small and go big. That's right, when others are abandoning ship near the end of a rotation, which is what I think is happening at the $50 level, you need to join the ship. Sure, you may be seasick for a couple of days. I say go take some Dramamine, for heaven's sake, and get ready to experience the next ride, the one that everyone's giving up on right before it happens.