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Opening Segment 1
Title: |
'Technical
Knockout'
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Featured Stock(s): |
EMC Corporation (EMC*)
See Opening Segment 2,
below...
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JJC: How do we
make sense of today's
tech-fueled rally?...
And, more importantly for
the purposes of this show,
how do you make some money
off of it?
For the last couple of
weeks, tech was trading as
though it had been
mauled... the market
abandoned it to a gruesome
death...
But, today, we get some
strong news from
IBM (IBM)
and, all of the sudden,
tech stocks came roaring
back from the grave,
dragging the industrials
higher along with them...
genuine pin action.
How did it happen?...
How can you look for some
profit?...
. . . .
.
The market didn't rally
172 points just because
IBM had a great quarter...
You see, I think this tech
rally was long overdue...
The truth is, nothing was
wrong with tech in the
first place... As
these stocks got knocked
down, day after day, there
was never really the bad
news to justify these
declines...
Tech got pushed down,
because investors panicked
and sold the good ones
with the bad...
Since there was never any
good reason for tech to go
this low, the moment we
got one good reason for
tech... well, all of tech
rallied. But
not enough!
So, in honor of IBM...
we're inaugurating a
week-long series featuring
overlooked tech stocks,
because tech is en fuego
(i.e., on fire), and I
believe it's going to stay
that way for a while...
. . . .
.
But where do I start?...
Well, we already have
Corning (GLW*)...
I've done GLW* so many
times... GLW*,
today, up 66 cents.
Remember, GLW* already
told you it was
better-than-expected, but
the stock is not up...
I have
Hewlett-Packard (HPQ*)
in
my charitable trust...
HPQ*, last week, said that
the quarter was good, but
the stock is at $46, right
where it left...
So those obviously work,
right?...
These are two companies
that just told you things
are good, and yet the
stocks aren't up... and
their quarters - I believe
- will be terrific...
You know, as I told you
last week, I like
Intel (INTC)
down at this level.
I expect an upside
surprise from
Microsoft (MSFT)...
and, of course, I have
always backed my
three-quarters of my Four
Horsemen... Research
In Motion (RIMM),
which is down way too
much... It's not a
Garmin (GRMN)
play, believe me...
You know I like Apple (AAPL).
I hope you bought that
today, ahead of the big
MacWorld... And Google (GOOG)
I have never backed away
from. It was great
to see Harry Lang (i.e.,
fund manager of the
now-publicly-available
Fidelity Magellan Fund)
talking positively about
GOOG. He's going to
get a lot of money in when
Magellan opens, and he's
going to be doing some
buy, buy, buying of that
great name...
. . . .
.
In honor of IBM - the
stock that did all the
heavy lifting - I'm going
with the cheapest of the
bunch, based on its hidden
assets... the one that has
a lot in common with
IBM... and I'm
talking about
EMC Corporation (EMC*)...
This stock - a storage
hardware maker that spun
off
VMware (VMW)
over the summer, but still
has a big stake - is the
one I got the most
questions about when I was
signing at Costco, for my
new book,
Stay Mad For Life...
EMC* has singed a lot of
people for no good
reason...
The stock is down a
whopping 34% since
October... The
Street assumed tech was
dead, so the resulting
fire sale on EMC* drove
the stock down to just
below $17, and that's the
price after today's slight
recovery...
This one's got a lot
further to go.
You've got to believe in
this one...
. . . .
.
I like the stock now for
three simple reasons...
First... the same thing
that drove IBM's numbers
today should also work in
EMC*'s favor. IBM is
the tell, because they
have the same type of
clients. It was the
strength of international
that drove IBM's quarter,
and international makes up
40-45% of EMC*'s sales,
and I think they have a
better product line.
Second... We've got
something topical here...
EMC* announced a
first-of-its-kind new
product today. Now
you know I typically do
not like to recommend
stocks on new products,
because they tend to be
down the line...
What I see here is that
there is integration of
flash-based solid state -
which is much cheaper and
better... That drives into
a core product
portfolio...
Translation... this
kind of storage uses less
energy than non-flash, and
takes less time to access.
This is a Q3 (i.e., third
quarter) piece of
business... not out to
2758...
. . . .
.
The third, and best,
reason to buy EMC* is all
about its stake in
VMware (VMW)...
This is the absurdly low
valuation the market has
pinned on VMW's parent,
EMC*...
Now this is the year,
2008, when EMC* can start
selling shares of VMW.
EMC*'s stake is worth
roughly $26 billion
smackers...
EMC*'s market cap alone
(i.e., the number of
shares outstanding times
the current share price)
is $35 billion...
Since they can start
selling VMW right after
Valentine's Day, when the
stock's six-month lockup
expires - even though
Cisco
(CSCO)
and
Intel (INTC)
must wait longer, before
they sell their large VMW
positions - I think EMC*
starts to soar...
. . . .
.
Now we're starting to talk
about one month... one
month for you to buy EMC*
before they can start
selling their VMW...
What are you waiting for?
Down 10 points?
The story of EMC* and VMW
has happened before, and
we've been chronicling
it...
When
Cypress Semiconductor (CY)
spun off its ultra-hot
SunPower (SPWR)
division, CY ramped in the
months leading up to the
end of its lock-up
period... when it could
start selling SPWR...
In the five months, before
the end of the lock-up
period, CY gained 36%.
In the last month alone -
where we are now for EMC*
- it could rise 45%
from its current levels...
I would pay 20x for it...
Once it can sell shares of
VMW, the Market will have
to start giving EMC* a
multiple that's more in
line with what its peers
get...
Even if you're
pessimistic, I see a $21
price target... but, more
likely, it goes to $23.87,
up 45%... I call that
game, set, match...
The conclusions are
simple... The
market's valuing EMC* at
next to nothing. But
I believe it's worth a
whole lot more, especially
when it can sell its huge
stake in VMW.
. . . .
.
The Bottom Line!:
The first
tech comeback play of the
week is
EMC Corporation (EMC*),
knocked down by Goldman
and a bunch of other
people who don't know what
they're doing... a stock
that's been overlooked and
mistreated for far too
long, and is ready to make
its comeback. One
caveat... if you put a
market order in to buy 200
shares... I am
guaranteeing you will
get the worst price of the
day... and then you'll
hate me, and you'll turn
me off, and you'll start
watching other things, and
then I will be sad...
[See Jim's 2nd Opening
Segment stock picks
below... ]
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See all of tonight's stocks'
latest quotes on
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Jim
Cramer's
rating on
this stock |
STOCK
SYMBOL |
Closing
price
that
day |
Opening
price
next
day |
Full Company
Name/Comments
(see comments above for
each) |
|
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EMC* |
16.80 |
16.95 |
EMC Corporation (EMC*)
Price target range: $21.00
- $23.87
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Final Segment 1
Title: |
'Prescription Plan'
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Featured Stock(s): |
Three Stock Picks, named after
the Lightning Round, in the
closing segment.
2nd segment picks
below...
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How does a pessimist - a
glass is half-empty kind
of guy... what does
he do with a big rally
like the one we had
today?... Will
it continue?...
So how do we deal with the
rotation into technology,
meaning money flowing out
of other areas, into tech
stocks... and how do
we deal with the fact that
more industrial stocks
were being bought today,
when we still believe in
Cramerica, that the
economy is headed for a
recession or, at least, a
nasty Fed-mandated
slowdown?...
So, if you're like me, you
want to take some weakness
and do some buying... you
want to take the stocks
that are getting thrown
away today... you
want to tack against the
upbeat sentiment that
IBM (IBM)
spawned, and buy the
recession stocks that
suddenly got dumped
instantly...
. . . .
.
I'm saying that you've got
to have a diversified
portfolio, and this is
when you strike on the
consistent growers...
You want to find the most
consistent stocks out
there... the ones that
were marked down today...
but should get marked up
again, over the next few
months, as the environment
swings back to its old
glass-half-empty self...
. . . .
.
When the techs were
getting hammered, we told
you to do a little
buying... That paid
off with this rally...
And now, that defensive
stock group - the ones
with exposure to big
pharma - they're whacking
them... They're
getting hammered, so you
want to buy them, because
there are probably only a
few more days before the
Fed lets us down again,
and everyone starts
fretting about how the
world is coming to an
end...
I guess what I'm saying is
that we need a little
Chicken Little
insurance... for the house
of pleasure.
And, for that, we want...
I have a group here that
has been so great, but was
down today... that I've
been wanting to talk about
for some time, but we just
haven't had a down day...
and they're called
contract research
organizations... The
shorthand that we use on
Wall Street... is CROs.
These are companies that
exist to save money for
big pharmaceutical
companies and biotechs.
They're outsourcing plays
that are used to help
develop new drugs...
These guys - CROs -
conduct and manage
clinical trials... and
also manage data for the
FDA... This works
because, right now, big
pharma has wads of cash,
but very little growth.
CROs are the winners of
big pharma's desperate
search for growth which,
of course, is like crack
on Wall Street...
When big pharma comes to a
CRO, they can cut costs,
and keep laying off their
employees by outsourcing
the development work they
used to do in-house...
CROs do it much more
efficiently. That
makes this group one of
the most defensive out
there... They depend
on spending from pharma
and biotech, and those
companies are
product-strapped, but
cash-full...
. . . .
.
Anything that can reduce
drug and healthcare costs,
speed up the development
of drugs, and allow drug
makers to focus more of
their time messing with
molecules to create new
drugs, rather than
spending millions to run
studies... That's
going to work here!
That means that the time
of the contract research
organization has come.
Now, I'm teasing you here,
but stick with Cramer
after the Lightning Round,
for my top stock that fits
the thesis, and a couple
of more good ones thrown
in for good measure.
. . . .
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