Great companies prevail. Best-of-breed companies don't go away and you can't sell them because they are built to last and have the best management.
I think of this because suddenly out of nowhere, because interest rates are going up we see the wholesale abandonment of anything involving tech. At this very moment you can't touch Salesforce (CRM) or ServiceNow (NOW) . Apple (AAPL) is toxic. Facebook (FB) is a black hole and Amazon (AMZN) has its numbers cut because of labor costs.
To me this is all understandable. It is time for the energy stocks to shine, again, because they are so under-owned. Sure you can buy industrials because of a worldwide view that the U.S. infrastructure bill will spell growth. The banks? No kidding, they all go up when rates go higher whether you are talking about Wells Fargo (WFC) , which was hated last a fortnight ago because of a $250 million penalty from the feds, or Goldman Sachs (GS) because it bought a company people don't understand, or JPMorgan Chase (JPM) and American Express (AXP) because they are levered to rates or travel and leisure.
That's terrific. If you run a barbell portfolio with growth on one side and value on the other you will do well here.
What matters to me, though, is that you do not throw away an Amazon or an Apple because you see others do so. Think about all of the times you saw people dump Alphabet (GOOGL) or Microsoft (MSFT) only to come back to them when the industrials falter or the banks miss their numbers, which will probably happen again when they report in a few weeks.
You need to be thinking about what's best of breed and can figure things out. Do you really think that Amazon doesn't know how to rein in costs? Are you sincerely worried about Apple's iPhone buildout because you see electricity being cut back in China causing factories to close?
There are some worrisome FAANG signs. I do wonder if Facebook is getting real pushback from advertisers because of worries about being next to foul content. We saw Instagram's head talk about pausing development on a kids' site, which I regard as an admission that they have to do more. I am also conscious that Salesforce CEO Marc Benioff, often considered the godfather of tech these days, does not have a positive view of the company because he believes that it has been a source of information that does not deserve to be heard. I wish that Facebook would create an internal Supreme Court of unarguable arbiters that would clarify what can be run and what can't, literally on a daily basis. Take these issues out of the C-suite and put them into a place that's not assailable and listen to them. I believe that Facebook sells at 25 times earnings because people are worried that advertisers will abandon the company.
Which comes back to my opening comments of best of breed. There are no issues that Apple is best of breed, I think that CEO Tim Cook will triumph over this rotation and it is giving you still one more chance to buy. Same with Salesforce. Or Amazon.
You can buy these when they are down because management will figure it out, they will get it right, Amazon will automate. Apple will find a way to build all the phones it needs. Benioff will buy what companies are needed, like Slack (WORK) , to stay competitive.
The only potential outlier is Facebook. This company must obey its advertisers and become even more serious -- and I use the word "even" because I know they are doing some things right -- about being a single source of truth on the web and not an earnings juggernaut.
Companies don't become best of breed unless they are the best in everything they do. Facebook hangs in the balance. I have faith that CEO Mark Zuckerberg can pivot even if he thinks he is doing everything possible to make his site safe. It's not up to him, though. It must be up to others in the company whom he must be beholden to. Otherwise the company will become just another also ran and you will want, on a dip like this, to buy the great American companies that are momentarily out of favor and Facebook, which I own for my charitable trust, won't be one of them.
(CRM, AAPL, FB, AMZN, WFC, GOOGL and MSFT 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.)
