Forgive and forget? Yes, if it could be sustainable. That's my take on today's winners, a group of stocks that defines how desperate this market is to find stocks that haven't moved and cash in on them before they take-off.
First up, Disney (DIS) . Tomorrow the company reports and the market already likes what it sees. How is that possible? Because there is a growing recognition, one emphasize by my colleague David Faber, that the cord cutting phenomenon is now waning. Not only that but the ESPN+ over the top offering is gaining traction. At the same time Disney looks to be buying some key Fox (FOXA) assets that will change the narrative from one of "losing subs" to one of tremendous untapped growth for movies, theme parks and a competitor to Netflix (NFLX) . You do not see this kind of move, a concerted level of buying that's monumental and vociferous unless institutional buyers are anticipating a blockbuster forecast. Perhaps more important buyers are forgiving the company for having to pay so much for the Fox business and forgetting that ESPN was experiencing big declines. That's how the stock could hit its 52-week-high today and perhaps take out its all-time high of $123 three years ago. For many, including me, this move could be a homecoming because I have always said that if you want to give a child or an infant a stock to make sure she learns what the market is all about, make it something she knows from her daily life, make it Disney.
You want forgiveness? Look no further than the stock of Facebook (FB) which is on a tear today off of a Stifel note upgrading the stock and saying that the worst is over and now the earnings are reset. The term reset means that we know that Facebook isn't the same Facebook as it was two weeks ago before the quarter when we expected plus 40% growth.
But it also isn't a stock that deserves to sell in the $170s at least according to the firm, because it will still have 20% growth and that's mighty hard to come by in this market, especially for big cap stocks.
Even as my charitable trust owns the stock, I, like pretty much everyone else, feels pretty had. You don't see a lot of forgiveness here by shareholders. But the non-shareholders seem more willing to forget. For example, the prospects that Facebook might be able to develop an eBay (EBAY) like product among other services if they can get banks to share their customer information with them.
I think this one really stretched credulity. Do you think a bank will give this company the benefit of the doubt and hand over data to them? Do you think that customers want Facebook to have this data, the Facebook that has been pilloried endlessly for selling your data to others?
That said, Facebook has reset expectations to where they can be beaten. I say that because I know on Thursday we heard Clorox (CLX) talk about how it is putting 60% of its advertising on line and it is very much using Facebook as part of the mosaic. Further, Kraft Heinz (KHC) , hardly known as a visionary when it comes to getting in touch with younger consumers, made a point of telling people on its conference call last Friday that it is going digital in a big way. Again, that means Facebook. It's unavoidable. So while expenses are going up and revenues are going down neither is so heinous that fresh buyers mind, again, because they most likely weren't part of the debacle, the sell-off that will live in infamy.
Or how about the stock of T-Mobile US (TMUS) ? When CEO John Legere announced that he was electing to merge his company with the Softbank (SFTBY) -owned Sprint (S) , it was met with intense derision and the three stock sank like a stone going from $64 down to $55 in seven days.
Now, though, there's a budding consensus that perhaps the Justice Department will allow the third and fourth largest carriers to merge in order to make them more competitive in a 5G world versus AT&T (T) and Verizon (VZ) . They are willing to forgive the idea of the merger and forget that the commentary at the time was a resounding "no can do."
Some of this is the infectious way that Legere tells the tale, basically that neither Sprint nor T-Mobile will be competitive enough to get into a real price war with AT&T and Verizon and not be decimated. Some of it is that T-Mobile's quarter was so strong last week that you can risk the deal falling apart. No matter, the market is in total forgiveness mode with this stock and it's willing to ignore previous utterances that the deal will die like so many others that Justice has been challenging.
Then there's the curious case of Henry Schein (HSIC) . Here's a company that has several research firms predicting a near-death earnings experience because of a slowdown in its dental group, which includes equipment and consumables. Leading the charge against it? Amazon (AMZN) , which has moved in to offer product cheaper than Schein can do. No matter, the numbers here shown a dramatic acceleration and they caught people, especially the shorts, by surprise. We got a real rip-snorter here and given how the negativists seem to have no choice but to switch positions, the move might now be done.
Finally you want the ultimate in forgive and forget? A week ago Chipotle (CMG) had to close an Ohio store after some diners experienced nausea and diarrhea. The stock dropped a quick 7% as people said "here we go again," reminiscent of the e-coli outbreak that laid the stock low a few years ago.
But this is a new Chipotle, one that is taking control of its own narrative, that is doing inventive things, that is now under the tutelage of chief executive officer Brian Niccol, who did such a good job at Yum's (YUM) Taco Bell before coming over to the organic and natural Chipotle. What did people think of Chipotle during this crisis? How about free guac on National Avocado day, I mean talk about obscure: I own a Mexican restaurant, Bar San Miguel, and this holiday was news to me. How about free delivery for orders $10s or more by Doordash. What's a stomach illness in Ohio versus free guac and free delivery? Not much. Forgive and forget and buy.
Of course, not everything can be forgiven. Newell (NWL) reported today and whether it be the $100 million that the trade war might cost them, or the decline precipitated by the closing of Babies R Us - don't forget they own Graco - or the sudden negatives from the once stalwart writing group, there was no forgiveness. In fact there was outright confusion on the part of analysts who seem to rebel against the statement CEO Mike Polk made about net sales being "a bit below our expectations." The community of analysts, which turns into a community of jackals when you get this level of disappointment was not appeased and I think that Newell shareholders are in for another round of pain.
Still though, the overall theme of forgive and forget provided the impetus for what started out rocky but ended smooth as silk as analysts and shareholders both put negative news behind them and accentuated the positive for a host of formerly hated stocks.
(Facebook and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells FB or AMZN? Learn more now.)
