Let's talk risk. Not enough people talk about risk and so many talk about reward that the cacophony drowns out reason and reason is valuable. Even in this day in age.
Last week we saw the need for risky gains become paramount, and to do that you need juice, or margin. There were too many people using margin, which is, at a point, equal to too many people using credit cards. I know whereof I speak: I had seven credit cards after law school. Not a great way to manage your money.
Now I can talk a blue streak about Robinhood -- congrats on the capital raise, or Reddit -- congrats on the visibility and excitement, or GameStop (GME) -- congrats regular investors on the big win, but remember there is no win until some profit is taken.
Those who think I am being anti-capital gain, all I can say is, that's up to you. My mission has been to help out me -- the regular guy -- the guy who has been trading since 1979, because I had no one to help me out. I want to be that guy. I think I am.
So what does that guy say? Simple. There are two kinds of risk, the kind you don't want to buy, systemic risk, and the kind you do want to buy, anything but systemic risk. Systemic risk means the center might not hold. Non-systemic can be garden variety if your head is cool. This short-selling frenzy, which represented about $100 billion worth of stock, involved regulatory risk. How did the regulators allow some short selling funds to short an unfathomable 148% of a company's float? How could the company, GameStop, be allowed to remain silent? How could Robinhood not get a better handle on helping its clients? That's really about it. If you were off margin, you aren't sweating things today.
I am a big believer that you should never invent the wheel when you have a darned good wheel and that's what we have in our broader themes that we like to fall back on in times of turmoil. We are in turmoil and we aren't out of it, but we can see through it if we have the themes that can allow us to buy stocks that can bottom or get cheaper as they go down.
We have outlined them several times. We shape them according to events. Because we are in earnings period we have had to make adjustments and because some stocks have come down in price we have to change emphasis. So, roll up your sleeves like me and let's go to work.
Going into this earnings period, we had no idea how much of a chip shortage there was, some related to gaming, some related to work at home, some related to personal computers, and some to telemedicine, self-driving cars, you name it.
So there is a new theme: the chip shortage. We just saw the quarter from Lam Research (LRCX) . It is the best in show semiconductor capital equipment company, the equipment you need to make semis. Applied Materials (AMAT) was amazing, too. As was Taiwan Semiconductor (TSM) . I am not going to say I would wait until, I am giving you stocks to buy and buy lower through out this list.
Second, the shift to ecommerce. It's unrelenting and it not driven by stay at home conditions. Ecommerce is Amazon (AMZN) , Walmart (WMT) , Target (TGT) through Shipt, Shopify (SHOP) , Microsoft (MSFT) , Adobe (ADBE) , Salesforce (CRM) , Service Now (NOW) , and now Facebook (FB) , Alphabet (GOOGL) , Square (SQ) and Paypal (PYPL) . That's a long list. Consider it a real good menu. Facebook and Microsoft -- think Azure -- were unbelievably good last week.
Third, the re-opening trade. If we are going to have 50% vaccination by May, then we need something to own. For ActionAlertsPlus.com, we like Disney (DIS) and Boeing (BA) . Disney has come down from that amazing quarter. Boeing didn't go down despite a hideous quarter. That's very positive. Honeywell (HON) had a tremendous quarter last week without uplift from Boeing. What happens when we re-open?
Fourth is digitization, heavily linked to ecommerce. Here we feel bold enough to recommend Snowflake (SNOW) , Frank Slootman's company. Salesforce and Adobe (ADBE) . Duplicative. To drive home the point.
I wish number five didn't exist, but it does: cybersecurity. Menu: Crowdstrike (CRWD) , Palo Alto Networks (PANW) , ZScaler (ZS) and Okta (OKTA) , the last being identification of yourself, hence its durability.
Six: 5G: the winner and new champion is Skyworks (SWKS) . Apple (AAPL) had an amazing 5G quarter. Qualcomm, Qorvo (QRVO) , Crown Castle (CCI) , Marvell (MRVL) , T-mobile (TMUS) , Broadcom (AVGO) , Inseego (INSG) , NXP Semi (NXPI) -- again a menu.
Seven: Stimulus. As always people get too carried away with stimulus. I like to keep it simple: rocks, like Vulcan Material (VMC) and Martin Marietta Materials (MLM) . Or Caterpillar (CAT) , which had a great quarter last week.
Eight: China. Now the Baltic freight index has started breaking down so take your foot of the commodity pedal. Apple (AAPL) and Starbucks (SBUX) had amazing China quarters just last week. Nike (NKE) was terrific, too.
Nine-self-directed stock pickers. Wow, Robinhood and Reddit showed us that people want to won stocks. Why not go with Morgan Stanley (MS) , which just bought E-Trade and is run by the risk averse James Gorman. I like risk-averse when it comes to capital.
Ten is fintech: We realize that younger people don't like banks. They like Paypal, Square and the newly-public Affirm (AFRM) . They like Intuit. They like (IPOE) which is Sofi. I don't pick in these. I just tell.
Eleventh: health care. We have Thermo Fisher (TMO) on "Mad Money" on Monday night. What a quarter. It and Danaher (DHR) are the arms dealers to the companies trying to conquer all sorts of diseases not just Covid. Eli Lilly (LLY) is doing breakthrough work with Alzheimer's. Don't forget Teladoc (TDOC) . Abbott's (ABT) had a very big move. Be respectful of that.
Twelfth: electric vehicles. Look, this is the future. That means General Motors (GM) , which has gotten ahead of everyone else with its carbon neutral promises. Plus if it goes down you can buy more. Specs? Mp Materials Corp. (MP) -- a precious metals play that may be the epicenter of the next enthusiastic crowd, or Quantumscape Corp. (QS) -- real company, real technology -- or TPG Pace Beneficial Finance Corp (TPGY) -EVBox for favorite charging play. LikeVelodyne Lidar Inc. (VLDR) ? Like Luminar Technologies Inc (LAZR) . CIIG Merger Corp. (CIIG) and Northern Genesis Acquisition Corp. (NGA) are real good, too.
Thirteen? Remote work. I know there are people turning against this one. We saw a downgrade of Williams-Sonoma (WSM) on Monday, I think it is too soon. I still like Zoom (ZM) , Wayfair (W) , Logitech (LOGI) , Amazon and feel free to explore RingCentral (RING) .
Fourteen: There is still an exodus of cities and as long as rates stay low you can buy Lennar (LEN) , Toll (TOL) , Pulte (PHM) , D.R. Horton (DHI) . RH (RH) -- yes, it's doing great -- Home Depot (HD) , Lowe's (LOW) -- despite the downgrade -- Azek (AZEK) and Trex (TREX) .
Finally, fifteen-homage to Biden-environmental energy. Plug Power (PLUG) is far away but so were mobile phones at one point. Linde (LIN) is realistic hydrogen. I like Generac (GNRC) , too. Others have to come in.
I wish I could say that GameStop (GME) is a new theme. But it's not a theme. It's a company that is challenged. I wish I could say AMC (AMC) is a reopening trade, but that depends upon how much stock it can sell to pay down debt. I wish I could say that silver is a big buy here, but you need a better economy although I have recommended Pan American Silver (PAAS) since 1996 and still like it.
But what I am looking for are stocks I can recommend -- that if they come down because of non-systemic risk, I have confidence you can buy more, not cut and run.
So pick from the menu. We have vetted them as best we can and that's the promise I make to you.
(DIS, BA, FB, HON, AMZN, WMT, GOOGL, MSFT, CRM, AAPL, CCI, MRVL, AVGO, NKE, SBUX are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
