• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

The Second-Strongest Stock Market Sector Doesn't Jibe With the Strongest

You could throw darts at financials and health care and win. 
By JIM CRAMER
May 18, 2015 | 08:16 AM EDT
Stocks quotes in this article: VRX, BMY, ABT, AET, ANTM, CI, CAH, MCK, HCA, REGN, GILD, EW, STJ, ADM, TSN, MDLZ, SJM, CAG, GIS, TGT, JAH, NWL, SWK, MHK, SHW, LEG, MAS, WHR, HD, LOW, COST, CIEN, CSCO, JNPR, XLNX, ALTR, ADBE, AKAM, BRCM, IBM, HON, ROP, TXT, IR, EXPE, VAC, CCL, HOT, WMB

(This is Part 2 of the article: "The Best Charts in the Book Are All in Breakout Mode")

The second strongest group doesn't jibe with the strongest: the health care. You should be a hard seller of these stocks if rates are going higher. Someone's wrong here.

Or, it is just possible that portfolio managers never lose their ardor for stocks like Valeant (VRX), Bristol-Myers Squibb (BMY) and Abbott Laboratories (ABT) on the drug side, Aetna (AET), Anthem (ANTM) and Cigna (CI), in the health maintenance group, Cardinal (CAH) and the ever-so-loved McKesson (MCK), in the cost containers, HCA (HCA) for hospitals and Regeneron (REGN) in biotech although I think that Gilead's (GILD) finally making its move.

There's always one beloved device company, and the one that's been seized on in this environment, now surpassing Edwards (EW) for love, is St. Jude Med (STJ), which showed me on Mad Money its incredibly small heart device, which is now shipping in volume and will be huge.

I don't know if portfolio managers will ever leave these stocks no matter how high rates go -- something I didn't think I would ever write, but it's been so long since a rate hike, who knows how well they will behave?

Two other groups surprised me for their strength: the foods and the housewares. In the foods you have Archer-Daniels-Midland Company (ADM), Tyson (TSN), Mondelez International (MDLZ), J. M. Smucker Company (SJM), ConAgra Foods (CAG), and General Mills (GIS). I, frankly, can't explain these moves other than the fact that they simply had somewhat better earnings than expected. I say "somewhat" only because the real surprise is that only Mondelez truly delivered excellent earnings, and that was more bottom line than top. This strength surprises me and made me think that there could be more imminent consolidation in the group.

The tobacco stocks are all running precisely because of that consolidation. I was truly surprised to see General Mills up on that list, given that cross-town neighbor Target (TGT) has decided to cut back on the promotion of sugary cereals. Again, it just feels like consolidating.

Everything that goes into a house acts well: Jarden (JAH) and Newell-Rubbermaid (NWL) for housewares, Stanley Black & Decker (SWK) for tools, Mohawk (MHK) for carpet, Sherwin Williams (SHW) for paints and Leggett & Platt (LEG) for bedding. Noticeably absent are Masco (MAS) and Whirlpool (WHR). But the group is strong enough for me to believe that Home Depot (HD) and Lowe's (LOW), when they report this week, will be just fine.

It will be a tug of war, though, between apparel retailers -- almost all of which were terrible -- and the hardware guys, although they are on different cycles. You certainly feel more bullish about the two big-box chains because of the action in these suppliers, and a circle back to Costco (COST) remains warranted.

Technology seemed very stock-specific. The networkers, namely Ciena (CIEN), Cisco (CSCO) and Juniper (JNPR), look great. I think that's because people keep expecting a return of the service providers -- they have really cut back -- and because there's the possibility of better-than-expected Asian orders, as well as continued strength in Europe. I say stick with Cisco.

There are the takeover names, namely Xilinx (XLNX) and Altera (ALTR), as they've been floated as targets of late. Adobe (ADBE) and Akamai (AKAM) both had amazing quarters, so they are running. Broadcom (BRCM) acts the best of the pure semis. And IBM (IBM) is turning hard, I think because it is a terrific weak dollar play and because the company is, once again, reinventing itself.

What's really surprising? If the dollar truly is getting weaker, there isn't much of a move toward an industrial breakout yet. Honeywell (HON), Roper Technologies (ROP), Textron (TXT) and Ingersoll Rand (IR) are the only standouts. This group could have a monster run if things are just beginning, given how few of these stocks are truly breaking out.

Travel stands out, but it could be a reaction to some excellent earnings from Expedia (EXPE), Marriott Vacations Worldwide (VAC), Carnival (CCL) and then, on a takeout possibility, Starwood (HOT).   

Everything else seems dramatically one-off or, special sit, as we would call it: Williams (WMB) on the takeout of its MLP. Yum! Brands (YUM) on activist pressure, Danaher (DHR) and eBay (EBAY) on breakup, Electronic Arts (EA) on a breathtaking earnings surprise and Netflix (NFLX) on Chinese possibilities.

Two others that "feel" odd are Cabot Oil & Gas (COG) and JetBlue (JBLU). They are the only ones of their gigantic sectors that act well which, to me, screams "something's up here that is worth pursuing."

The bulk of the rest of the charts are truly in flux. To me, the ultimate takeaway is that you can throw darts at the financials and the healthcares and hit bull's-eyes.

But in pretty much everything else, you could miss the target entirely in the vast majority of stocks.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long TGT, CSCO, HON.

TAGS: Investing | U.S. Equity | Stocks

More from Stocks

The Markets Are Steadily Climbing

James "Rev Shark" DePorre
Apr 14, 2021 10:42 AM EDT

I'm hoping that we see some more rotational action rather than a broad market correction.

JP Morgan Had Another Outstanding Quarter, Here Is How I'm Playing It

Stephen Guilfoyle
Apr 14, 2021 10:34 AM EDT

Should you take profits or buy here? This is my thinking on the stellar banking name.

How 'Inflated' PCE Figures Might Affect Fed Rate Hikes

Tom Graff
Apr 14, 2021 10:30 AM EDT

Prices are rising, but the data is messy, especially right now. Here is how I'm thinking about it, and when the Fed might hike rates as a result.

I'm Looking at These 2 Stocks for Potential Value

Jonathan Heller
Apr 14, 2021 10:00 AM EDT

Super Micro Computer and Seneca Foods are on my radar.

Is the Uptick in Inflation Just a Blip?

Bret Jensen
Apr 14, 2021 9:00 AM EDT

If investors start to factor in higher inflation, we could be looking at a big increase in volatility in the months ahead.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • 11:18 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 5 Pillars of Exceptional Trading
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login