• 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
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • 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: Unpacking a Bottom's Tough Work

FedEx's rise on bad news and Facebook's fall on the same are two examples of how it's hard to figure out when enough's enough.
By JIM CRAMER
Jun 12, 2019 | 04:51 PM EDT
Stocks quotes in this article: FDX, CRM, DATA, MSFT, UTX, RTN, FB, LRCX

When is it enough already? When can we say, "You know what? I don't care. The stock's too cheap. It has to be bought?" Or when can we say, "Look out, that one's still radioactive."

This battle happens every day with individual stocks, and they can end up setting the backdrop for an entire session. Let me give you some cases in point so you know what I mean.

Let's start out with FedEx (FDX) . A prominent research firm came out today and cut numbers for FedEx, and lowered its price target. At the same time, the firm suggested that there is nothing new here; it's just the same old slowdown story, and it's probably in the stock. I read the piece as incredibly negative and thought, OK, here we go, they are going to take this sucker down again. What happens? FedEx powers up more than two bucks. Given the relentless decline this stock has had: $199 down to $152, before a little bounce up to $159, I figured the price-target cut and earnings reduction would knock the stock back at least to $157.

Nope. The stock rallies more than two bucks. To me that's a file away -- meaning that the worst may at least be over at FedEx, and the stock's now able to bounce on bad news.

If you think that the trade war with China could end, that says to me this stock may now be the one to buy, because even if estimates are too high, the stock might not get hit. The risk-reward is fabulous.

How about Salesforce.com  (CRM) ? We have seen this stock get pummeled ever since the company decided to buy Tableau Software (DATA) . I think that this acquisition is brilliant, because it is what the customers wanted. I was with a tech guy just today who was raving about how easy it is to use Tableau Software to analyze trends. When you combine the data Salesforce gives you with the analytics that Tableau provides, it could be an unbeatable combination, or at least one that beats Microsoft  (MSFT) , which is the biggest contender.

But people don't want to hear that. Investors have been fleeing this stock like there is no tomorrow knocking it from $162 to $139 over worries about dilution.

Now we saw a similar downtrend in Salesforce's stock when the company bought MuleSoft last year. Now that deal is one-third the size of this one, but the decline of Salesforce's stock lasted only a couple of weeks, and then it came roaring back.

Maybe it is too soon to buy Salesforce's stock. But I have simply been waiting for it to bounce to start forming a bottom. Looks like that might be starting just now. I think if you have been waiting to buy Salesforce's stock, tomorrow might be the day.

Or how about United Technologies (UTX) ? On Sunday this company announced a merger with defense contractor Raytheon (RTN) . It was a confusing deal, but it was also one that, if allowed by the Justice Department could create one of the greatest defense companies out there.

It was confusing for two reasons: one United Technologies is splitting up into three companies, a climate control company, an elevator company and an aerospace and defense company. Only the latter is merging with Raytheon, so there are a lot of suppositions of what the entity would be worth. It may just be too hard for most investors to even get a bead on it.

The second reason? Raytheon has been reporting a series of below-optimal quarters, because of some low-margin classified work, and because of some problems in missile manufacturing execution.

Yesterday we found out that notorious hedge fund manager Bill Ackman owns a stake and thinks the deal is troubling and told UTX chief executive Greg Hayes that he might have to fight the transaction.

The stock has now fallen $122 from $132, and today it has bounced a couple of bucks. At these prices, I think that you can buy the stock of United Technologies and get the three pieces, and then get Raytheon on top of that. In other words, I think the stock's gone down enough.

But you have to be so careful with sentiment-bottom calling. Take the stock of Facebook (FB) . I saw the stock go down today on news that Mark Zuckerberg knew about problematic privacy practices. When I read it, I thought I was reading an old headline, something that had run multiple times already. Same old, same old.

Well, that was sure wrong. The stock got rocked for almost $4. I couldn't believe it, especially because I thought that a piece of research yesterday out of MoffatNathanson suggested the impact of the negative news may at last be neutered.

Nope, this this is a story that, incredibly, still has legs. I am shocked that investors still care. Aren't they bored with this stuff yet? Unless they have a smoking gun memo about Zuckerberg demanding that all privacy is forbidden and that he wants an Orwellian, 1984 world coupled with a secret Stasi-like police force for all those who "like" anything, I know I don't care. I say you buy the stock now, because I know we are close to Facebook fatigue. Not yet, but good place to get started.

OK, how about this one: Lam Research Corp. (LRCX) . It makes semiconductor equipment -- the kind you need to make DRAMs and other kinds of chips. Today it got a downgrade, suggesting that there are some big-order pushouts. When I read it, I said tell me something I don't know. It seemed liked FedEx to me.

Turns out that was an ill-advised judgment. The stock gave up more than ten bucks. Unless the company pre-announces a shortfall -- always a possibility in the semiconductor world -- I have to think the bad news is in the stock at this point. The fact is, though, with tech there's always someone who doesn't know things aren't so hot and my knowledge that things are just OK there was simply too early, which is code for, well, "wrong."

Spotting a bottom is a very tough thing. You have to figure out three things: 1. How bad is the news really, in terms of actual estimate cuts?; 2. How primed is the stock ahead of it, meaning how much has the stock already gone down?; and 3. How clueless are your fellow shareholders? The real bottoms are spotted when the estimate cuts have been made, the stock's been softened like a beach before an invasion, and all the clueless hot money's gone.

That's a bottom.

Less than that? And you will be too early, which, alas, means you are going to get hurt.

(Lam Research Corp., Facebook, Microsoft, and Salesforce.com are holdings in Jim Cramer's Action Alerts PLUS charitable trust. Want to be alerted before 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.

Action Alerts PLUS, which Cramer manages as a charitable trust, is long CRM, MSFT, FB and LRCX.

TAGS: Mergers and Acquisitions | Markets | Trading | Technology | Transportation | Jim Cramer |

More from Jim Cramer

Jim Cramer: Playing the Relative Investing Game

Jim Cramer
Mar 4, 2021 6:41 AM EST

Investing can be fun until it turns brutal for what seems to be no reason.

Jim Cramer: When Do We Go Back to Buying the Winners and Stop Buying the Losers?

Jim Cramer
Mar 3, 2021 2:35 PM EST

One of the most continual themes in this market is that anything that was liked last year is hated this year.

Jim Cramer: These Tech Stars Really Shine

Jim Cramer
Mar 1, 2021 1:07 PM EST

Here are five buys in technology companies that are just out of this world.

Jim Cramer: This GameStop Nonsense Has Gotten Out of Hand

Jim Cramer
Feb 26, 2021 7:11 AM EST

It has become the market equivalent of the storming of the Capitol, and the viciousness must stop.

Jim Cramer: The Bond Market Vigilantes Strike

Jim Cramer
Feb 25, 2021 1:41 PM EST

What does that mean for stocks? Consider Nvidia.

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

  • 10:53 AM EST GARY BERMAN

    Nasdaq Composite: Some Backing and Filling Is Here

    As today is the 4th day of the month, it seems lik...
  • 07:59 AM EST PAUL PRICE

    Fabulous News on United Natural Foods (UNFI)

    The major potential risk factor for , its contrac...
  • 08:50 AM EST PAUL PRICE

    Michaels: Close to a Deal?

    It appears that a deal could be announced soon. ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 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