Cramer: Trump's Right About the Market

 | Aug 03, 2017 | 2:41 PM EDT
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Why don't stocks come down here? What is with this rally already? Are stocks just flying because, as President Trump tweets: "Business is looking better than ever with business enthusiasm at record levels. Stock market at an all-time high. That doesn't just happen." On another day where the Dow is flirting with all-time highs, the eighth up day in a row, it's worth pondering the question: Is the president right?

The short answer: yes. He is right. I say that because I have always been of the exact same mind: It doesn't just happen.

Things have to be very right for it to happen. It takes a special set of circumstances to have a market be this strong.

But the guy is so controversial, and I know that's not enough for you.

First, you have a right to be skeptical. Sometimes, for example, the fundamentals don't justify the run. Consider the stock of Tesla (TSLA) , which is up 62%. The company is losing money hand over fist. It needs a couple billion more just to get to where it needs to go. CEO Elon Musk is a showman, a promoter and, I am sure to many who analyze stocks, a charlatan.

But the fact is as long as people continue to give Musk money, the stock will go higher even if you think it shouldn't. There are willing buyers for it and they have every right to pay whatever they want to pay. You want to sell a million shares right here? Like it or not, there are buyers for a million shares. You think it is unfair that it is valued more highly than a GM (GM) or a Ford (F) ? I don't see people lining up to buy GM or Ford cars. I see lots jammed with them and incentives galore.

You don't believe it is right that a company losing this much money should be valued at $57 billion? Well, if it is never going to make a profit, probably not. If it was just a car company, most likely no. However, if it is a tech company that makes incredible machines that are loved? The answer is yes, the valuation can be justified. You love the car, you love the stock. Yes, it is as simple as that.

Second, we know that stocks are historically expensive now and, perhaps with slower overall growth both here and abroad, the asset class of stocks may seem overvalued to you.

I get that, too. I don't like to look at the top down, though, I look at individual stocks -- after all, it is really a market of individual stocks, and not just some basket like it is corn or soybeans.

So, let's do this. Let's look at the 10 best-performing stocks in the Dow Jones average this year and let's see if we can conceivably make a rational case for their moves, not to justify or refute the president -- who, by the way, is simply stating true news -- but to see if lunatics have taken these stocks up and they deserve to be lower, perhaps much lower.

Let's start with the stock of Boeing (BA) , up 52%. Outrageous? The big airline business has long been a duopoly, but I can argue that this is a moment where our plane company is vanquishing their plane company, Airbus of Europe. Boeing has a phenomenal order book, as far as the eye can see. Maybe further. It is, at last, making money with the Dreamliner. A lot of money. Its customers, the airlines, have never been this flush. Airline traffic is in secular growth mode because of the great middle classification occurring all over the globe.

The move's merited.

Next up, Apple (AAPL) , plus 35%. If this were just a cellphone company, I could argue it is too high. But if we can imagine Tesla as a tech company, we can certainly imagine Apple as a consumer-products company, and if we do that, the stock's way too cheap even up here. We have Clorox (CLX) on tonight, and that stock sells at 25 times earnings. The stock of Apple? Seventeen times earnings even as it has a product that's beloved by all measure and that it can raise prices on and is still purchased. Plus, now it is a recurring service revenue stream that's growing at 22%; that's bigger than a Fortune 100 company. (Apple is part of TheStreet's Action Alerts PLUS portfolio.) 

It's not merited. It should be higher.

Visa (V) up next, rallying 29%. Here is a company riding one of the greatest growth stories of all time, the worldwide change from paper to plastic. The stock's been on fire because it has accelerating growth and because it is so consistent that it deserves to sell at a premium to all the financials. Could it go down? Sure, for example, part of the valuation here is a hope that it can really take China by storm. If the president retaliates against the rapacious Chinese with sanctions involving stolen intellectual property, maybe China comes out and says, "No cards for you, Visa." That would knock out a growth component. I would then argue, though, it would be a serious buy and a gift if it came down.

Speaking of accelerating revenue growth, McDonald's (MCD) stock has rallied 28% and I think that's because worldwide growth is north of 6%, an astonishing level considering you can hardly call this is a young company. There are McDonald's literally everywhere already. They aren't putting up thousands and thousands of new stores. However, with a weaker dollar that translates to higher earnings, new technology that's improving the experience and a simplified menu, the darned turn is just getting stronger.

It deserves the run.

Then there's Caterpillar (CAT) , up 22%. This company has spent a lot of time in the wilderness licking its wounds. Management had to fire thousands of people in order to right-size the institution. Now, though, with only a little bit of pickup, it can make a ton of money and it did so this last quarter. Yet its sales are nowhere back to where it was before the Great Recession. If it ever got there, this stock could easily double. You want this one to come down and come down now, so you can get in it.

United Health's (UNH) a horse. Here's a company that's a huge beneficiary of the disarray in our healthcare system. It's a real Trump stock as in, if you think Obamacare's collapsing, you gotta own this one. What can I say? In the last 24 hours, three big health insurers reported and they made it clear that things are falling apart with the exchanges. I, along with just about everyone else I know, wants to buy this stock cheaper than it is. Forget about it.

After multiple quarters where business wasn't strong, Nike (NKE) reported a very good quarter. Even as sworn enemy Adidas gave you great numbers last night, I think Nike's back and its stock is only beginning to reflect that with its 19% run. Almost every clothing supplier -- PVH (PVH) , VF Corp. (VFC) , Columbia Sportswear (COLM) -- is running. This one should, too.

Walmart's (WMT) eighth-best and the 17% increase make a ton of sense to me because it's one of the few retailers with both the balance sheet and the family backing to make it a legitimate contender to take on Amazon (AMZN) . That's why its stock has been among the best in the group and in the market. The company, under CEO Doug McMillon, has made so many improvements and is going to leverage its huge store base to rival Amazon. If I am right, there's no way this stock will stay this low.

The stock of Microsoft (MSFT) has rallied 16%, and frankly that's just not enough after that remarkable quarter, which showed an acceleration of cloud growth as well as a huge amount of cash generation. How is it possible that it hasn't moved up more? That's the big question.

Finally, there's American Express (AXP) . It's the only one that I could argue perhaps shouldn't be as high as it is. The quarter was OK, not great. However, the stock has been higher with this same amount of earnings before. So I get it.

Conclusive? It is to me. While it's not a perfect sample, this analysis is representative of the broader market. So what can I say? On a case-by-case basis, I think the president's right. And if you think that's fake news or partisanship or hogwash, what can I say? That you know nothing? No. But let's put it this way. It's not hard to imagine these stocks going higher, and it's also relatively easy to argue that almost every single one of them is worth owning right here and certainly on any dip.

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