Stop trying to take your cue from the market. It's been more wrong than ever. Just today we saw the stocks of Microsoft (MSFT) and Advanced Micro (AMD) react absurdly to some incredible quarters. One could argue that Microsoft is doing so well that its stock should be eight points higher versus down eight points. The cloud, Windows, Xbox, LinkedIn, all sharply better than expected, materially better than expected. I am sure they are scratching their heads on this negative reaction.
But they must be beyond flummoxed at AMD about a quarter with a 93% improvement and a 50% increased forecast, much much better than anything anyone is looking for, and then to see its stock down? I could easily argue that, given how much share it must have taken from Intel (INTC) across the board, the stock should be at $100, up 15, rather than down a tad. I don't know where it would be if it weren't for it doing a stock for stock acquisition of Xilinx (XLNX) , a just-okay semiconductor company. It is clear, however, that arbitrage pressure - people selling AMD and buying Xilinx - hammered the stock relentlessly.
And then there is Spotify (SPOT) . It is ridiculous how often this one is wrong at first blush with people tripping over each other to find something wrong so they can justify the throng of sellers.
Do we simply blame the sellers and move on? No, I would blame the gauntlet, the 72-hour period where the trigger happy traders simply decided to follow the herd whether it is right or not. It's up the media then to justify the move thereby etching it in stone. You can't let those who take action wrongly dissuade you from the opportunity, the one that actually comes from reading the conference call and the research. Time after time when you see analysts raise price targets en masse but the stock goes down you have to use that weakness to buy. That's the case of Microsoft where you are shockingly, at last, getting a chance to buy as there was nothing wrong with the stock. Same with AMD where the share-take from Intel and the roadmap to stay dominant just doesn't. Nor does the implacable CEO Lisa Su who is not sitting down and letting Intel come right back. It is true that Spotify had a slowdown in monthly average users but that's the only line item I could quibble with and it certainly isn't worth this decline.
I know that it is hard to believe that the collective judgment of the market could ever be wrong but it is wrong all of the time which is where so many opportunities come in. Take the stock of Union Pacific (UNP) . When the company reported, the numbers were disappointing but Lance Fritz, the terrific CEO, explained that there were a lot of one time issues, especially weather. Otherwise it would have been a barnburner. Did the mob care for his excuse? Nope. The stock dropped six points immediately which then totally colored the narrative. You had to get out and get out now.
You see it is a George Michael market, you gotta have faith. I have faith in Fritz because he has delivered again and again. I have faith in Daniel Ek from Spotify because time and again you had to take his view of the quarter in totality, which is, of course spectacular. You have to have faith in Lisa Su, one of the great CEOs of our time, as her roadmap to win over the giant customers, the Googles (Alphabet (GOOGL) ) and the Microsofts and take share from Intel as she has done for several years now as one look at the chart since she came in tells you. Finally you have to have faith in Satya Nadella who has succeeded non-stop in creating value as he did again.
If you don't have faith in the great ones then you will just be a herd follower and that means you will repeatedly be wrong. Do your homework. Don't trust the stock. Trust the CEO and trust yourself.
(MSFT, AMD, UNP, and GOOGL 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.)
