• 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
    • Bruce Kamich
    • Doug Kass
    • 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. / Jim Cramer

Jim Cramer: These Two Surprise Stocks Would Fit Any Portfolio

I rolled up my sleeves to tamp the froth and slay the euphoria, and here's what I found instead.
By JIM CRAMER Dec 17, 2020 | 04:20 PM EST
Stocks quotes in this article: ACN, LEN, ZM, CRM, WDAY, ZS, OKTA, AMZN, HAL

When the market started percolating again on Thursday, I said, "That's it, I am going to take the euphoria head on. I am going to slap it upside the head and teach it a lesson."

How will I do it?

Why not just defrock the big percentage gainers in the Standard & Poor's. Just assassinate them, exposing how they didn't deserve to go up at all, let alone have gigantic moves and lead the averages.

I've decided to undress the top five stocks.

I never got further than the first two, Accenture (ACN) , the consulting firm, and Lennar (LEN) , the homebuilder, up 7% and 6% respectively.

Moreover, their conference calls are basically primers for what's happening, what makes it so hard to be bearish in this environment.

Accenture, an amazing company run by the brilliant Julie Sweet, crushed the estimates and raised its forecast in dramatic fashion. Their bookings rose an astounding 25% -- no one was looking for anything near that -- and guided up from $7.80 to $8.10 all the way to $8.17 to $8.40. We are in the midst of an extraordinary pandemic with joblessness that's unfathomable, but this company made so much money that it want back 3.3 million shares for $769 million, simply because it made so much money at a time when Wall Street didn't respect its stock and it was a bargain for those who knew. The company boosted its dividend 10%, giving you 88 cents per quarter.

Accenture is not a small company; 514,000 work there. New bookings were 12.9 billion, much larger than almost all of the high-flying companies that are loved on the Nasdaq, and certainly more than any special purpose acquisition company. They have a cash balance of $8.6 billion up from $8.4 billion. You never saw those kinds of numbers at the beginning of 2000, when so many companies were about to go under, even as their stocks roared higher. Margins were superb-Sweet runs a tight ship-and the company benefited from lower spend on travel and leisure -- the pandemic and Zoom (ZM) are enemies of the profligate and wasteful.

So, on the face of it, those are the kinds of numbers you should pay up for. You can't say Accenture is a fly-by-night. If anything it's a hidden gem.

Now, let's get to how Sweet made all of that money. Most companies need to get digitized and digitized fast. They need to bring in outfits like Salesforce.com (CRM) or Workday (WDAY) to get on the cloud. They need cloud security like you would get from Zscaler (ZS) or Okta (OKTA) . Do they go with Amazon (AMZN) Web Services? Which dashboard do they need?

Most CEOs don't know anything about these things. They know their business. Sure, they can call Marc Benioff at Salesforce, or Aneel Bhusri at Workday and say, "swing by."

Do they know Andy Jassy at Amazon Web Services? Or Todd McKinnon at Okta or Jay Chaudhry at Zscaler and say, "Guys, get me a secure cloud, will you" -- after they have been on premises for so long with closed systems. You think they know Rob Bernshteyn well enough to ask him if he can craft a procurement system that can save millions? How about workflow? Sure, maybe they met Bill McDermott when he was running SAP and they know him at ServiceNow for help.

But the fact is most CEOs know their business and just their business. They like their information technology people, but they tend to be wedded to a hodge podge bunch of legacy systems. Not good enough.

So what do you do?

If you are Halliburton  (HAL) -- one of the best oil services companies, knows its business cold -- you call Accenture. Sweet helped them digitize everything: cloud, finance, supply chain, you name it. They have no choice. As management said on the call, "Every business is not a technology business and exponential technology change is going to continue and now it's about the speed." Companies, they say, "need to accelerate their digital transformation across their enterprises, move to the cloud, address cost pressures, build resilience and security, address their operations and customer engagement to a remote everything environment and changing their expectations and fine new sources of growth."

If you are Halliburton, a terrific company so challenged by decline in exploration and production by its cash-strapped client base, you need to do all of those things. You need Accenture.

In shore, I wanted to shoot this company's stock price down, show why Accenture's not worth $175 billion. Instead, I realized that Julie Sweet may be the foremost proselytizer of the digital transformation and cloud engagement that nobody's ever heard of.

Accenture's a buy.

OK, how about Lennar, the giant homebuilder. Here's a hugely cyclical business that has to be on the ropes with almost 900,000 people filing for unemployment as Covid cases continue to skyrocket and Washington can't get its act together for a stimulus package. In the old days, a homebuilder, even one the size of Lennar, would be worried about its survival.

Nope. Lennar is a cash machine, generating $2 billion of homebuilding cash flows for the quarter and $3.8 billion for the year. Diane Bissette, the company's CFO, says it all when she said, "Our confidence in our operating platform and ongoing cash flow generation enabled us to increase our annual dividend to $1 per share from 50 cents per share."

Orders, up 16% to 15,214. Order volume, $6.3 billion up 22%. Book value is $57 up from $50.49, which is the worth of the company's land given that it has sold almost all of the houses it has. Nope, the company isn't about to go under. Instead it paid down $1.2 billion in this quarter alone and $2.1 billion during the year. Best of all, despite all that you hear about the increase in raw materials, gross margin was 25% up 350-basis points.

What drove this? Board Chairman Stewart Miller eloquently tells you in the preamble to the call: "Let me say that the housing market is simply very strong and demand for homes, new and existing, is greater than limited supply. It has simply never been this easy to sell as many homes as we would like in every market and every price range across the country."

How is this possible in the midst of a historic job-killing pandemic? "Low mortgage rates and ample deposit money from savings from vacations not taken, movies not seen, restaurants not visited and of course stimulus dollars from the government are driving customers to purchase a home, a larger home, a home with a yard and office, a nicer kitchen and a place to call their own."

So many bears and skeptics will ask, this doesn't this have to be the top? A top is when companies are overbuilding to meet demand when wages are collapsing and rates are skyrocketing. But rates for jumbo loans are almost as low as conforming loans, under 3%, in other words historically great rates and yesterday Fed Chief Jerome Powell said they are going to stay that way until 2023. Covid, Stewart explains, has made the home a refuge, "the hub of everyone's life."

Where's the red flag? Where's the cliched canary in the coal mine? I don't know, because, as Stewart says, "The underproduction of homes for the past 10 years has created a housing shortage," at the same time as the "millennial generation, which postponed family formation over the past 10 years, has pivoted quickly and is making up ground towards traditional family formation trends." Buying a home, he says, isn't some short-term reaction to Covid, but "a hard-wired way of life."

In other words, it's secular, not cyclical and gaining ground. Lennar's stock, at nine-times earnings, is a buy.

So, I went in to tamp the froth, to slay the euphoria, in light of our nation's grim holiday tidings, and what did I come up with? Two stocks that make a ton of sense in anyone's portfolio.

(CRM and AMZN 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.)

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

CRM and AMZN are holdings in Jim Cramer's Action Alerts PLUS member club .

TAGS: Investing basics | Stocks | Jim Cramer

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

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

  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • 12:08 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    As a Portfolio Name Agrees to a Merger, Here's Our...
  • 10:44 AM EDT PAUL PRICE

    My Very Best Pick for the Next 12 Months

    American Woodmark . It rarely gets better than th...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 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