Cramer -- Just Brilliant Last Night

(c) 2010 F. Bruce Abel

OK, so I stopped TIVOing and stopped watching Cramer for the last month or so. Went over to Fast Money guys, whom I like a lot. (Remember, complexity is your friend in trading. It keeps your eye off the ball -- so to speak.)

So Eunie was going to be out until 8 pm or so (she hates the clatter of Cramer and hates the thought that I might be losing a lot of money). So I watched Cramer last night. Awesome! A seminal segment. Or is it just me?

ed note: I just went onto No Hot Air,

http://nohotair.typepad.co.uk/no_hot_air/

and I am reminded that Cramer has been awful when predicting natural gas. So maybe he's not so good on oil either.

Anyway, herein his monumental call on oil stocks and also his withering take on why the analysts are not doing their jobs (they don't read his books is their basic fault).

Here is the beginning of Cramer's verbatim comments for the latter segment. For the former, scroll down to the very bottom of my blog and click on the lisk to "the best of the best" or whatever.

Jim: Surprise! Surprise! Over and over again people have been shocked, absolutely shocked by positive earnings surprises… that should not have been surprising to anyone… hence, my desire to give you a surprise party… in honor of these bogus surprises… they have become the theme of this earnings season… and we saw it play out again today with the surprise of Caterpillar… and the surprise of Whirlpool… two companies that baffled market players with their strength when they reported… standouts on a blah day when the Dow gained less than a point… the S&P was down about a half a percent… just as Netflix, Deckers, and Chipotle shocked, surprised and amazed so many investors with the greatness of their quarters last week...





The only thing surprising here besides my full dressed cake explosion… instead of a more scantily clad, perhaps even a bare-chested bust out… is that anyone was surprised by these fabulous numbers… in fact, they were all predictable… and all easy to see from a mile away if you are looking from the friendly confines of Cramerica… yet these quarters astonished so many people… that is how you get a 10 point single day move in a stock like Whirlpool… I mean a washer and dryer company, this is not no biotech… because some key institutional investors, including short selling hedge funds, just did not see the strength coming… if you watch the surprise party, it all seems very dated to me… the surprise, I mean come on, shocker… and you probably saw the good news coming if you follow the show.

So how come so many investors were genuinely blindsided? How is that possible? Did they just like the movie “Blindside” so much that they decided that blindside would make a good investing strategy? Even if it was a coining, grading cinema… well, anyway… no, no, the institutional investors who were bewildered by Netflix… bewildered by Deckers… bewildered by Chipotle… hey, bewildered by Caterpillar… and bewildered by Whirlpool… well, wait a second, all have one thing in common… they believe the Wall Street analysts who write and squawk on these stocks… and when things got better for the companies during the quarter, the earnings estimates proffered by those analysts were frozen in time from the last quarterly update.

You see these surprises were effectively created by the analysts because they have for the most part, abdicated and advocated their chief responsibility… and stopped entirely trying to calculate or gain estimates intra-quarter… that is not the way it was when I was running my half a billion dollars… uh-uh, see the old days before the adoption of regulation FD, there would have been a slew of repeated intra-quarter estimate bumps on these names… which would have eliminated the blindside surprise factor… but now the analysts have become static and predictable… all they do is extrapolate the last quarter once, right after it reports… and do not take into account anything that has happened in the last three months… that is the root of the surprise factor and the bogus surprise party that I am throwing… that is what propelled these stocks higher.

That is how Caterpillar and Whirlpool took so many people by surprise today… because the people are supposed to be trying to help you stay ahead of the game, weren’t paying attention to what has been happening over the last 3 months… the lift in the consumer, which of course benefited Netflix… Deckers, Chipotle… and Whirlpool… or the obvious return of the emerging markets that helped Caterpillar… were you really surprised? No, because you are not an analyst… these developments were clear to everyone but the analysts who is supposed to tell you what is going to do well… they are paid millions of dollars to do this but they cannot seem to model for the changes that are occurring… positive changes in the worldwide domestic economies… so they just wait for the companies to report before they update their numbers… they listen to their conference call and then they do a spreadsheet… that is all they do now.

And what is so crazy to me is that this almost fictional surprise based on sloth and paralysis, keeps happening over and over again… it keeps working… here look, take Whirlpool, for months now this company… for so many months this company has been telling anyone who would listen that they are really seeing the benefits of the Maytag acquisition… as well as incentives to buy new energy efficient washers and dryers… plus Brazil is a huge market for them… it has been since 1980.. .how could this stock have almost 10 days to cover a short ratio? How could someone bet against this? Given how often Whirlpool told you that things were going great guns… and that is how you rally 10 points when you report… short squeezes by those un, using the previously outdated analysts numbers that do not take into account the nation and the worlds changes since Whirlpool reported last.

Okay, how about Caterpillar? Which has told you again, and again, and again, that orders are coming back globally… and they are a global company… at the same time the domestic market has been so-so.. which is why the analysts seem to be keep missing the big picture… they are like domestic analysts… Caterpillar is a gigantic emerging market play… and emerging markets are incredibly strong… how can people be surprised at the Premier earth moving company is putting up huge numbers? Also, how many times did investors have to hear that you have to buy these stocks… on this show we have been saying it… when the earnings blossom? But before the revenue growth kicks in… people are saying, oh no until I see sales I am not buying… okay, now you have saw your sales… look at what price you had to pay… now, you see what happens when sales accelerate and you are just… well, let’s just say that you almost missed it… you got hurt if you waited for the all clear… if you are waiting for the bell to go off? You are in the wrong game…. go into boxing... unlike the analysts who had to anticipate the turn, you had to jump the gun.

Okay, then there is Deckers… this is one of my plus $100 stocks that I said will not quit… it has now entered the parabolic phase .. in part because the shorts pressed their bets and mistakenly believed that Ugg’s must have cooled off… maybe, look some day they will… but this is a $2b company with a potential Nike like franchise… Nike has a $35b market cap.

How about the Chipotle? It is worth talking about… it has the domestic model of good food… that is right, food that actually does not kill you for reasonable prices… I bet you that that is going to play perfectly overseas… they have a new kind of store, they call it the Model A.. it fits into all of those openings in the mall that are not doing well.. they used to just be in new malls… now next month they are opening in London… Europe soon after… this will be so easy for them because do you know what they do? They source food locally… they will become the first American company to not be an ugly American… they will be using French food… again, it is only $4.5b company… never mind McDonald’s which I own for ActionAlertsPlus.com, my charitable trust, is a $76b company… once again, polymeric move courtesy of the frantic short coverings by hedge funds who simply refused to believe how good this story is.. and you have to be cognizant of how Europe and possibly Asia can fuel international growth… even as there are many more places to put this 1,000 store chain in America without cannibalization… the analysts kept their numbers static… the short sellers believed it.

And finally there is one of my absolutely favorite plays, Netflix… which has the best subscriber growth of any… this stock is now up 30 points from last week… you know, I have got to tell you, there are myriad portfolio managers that love subscriber models for incredibly consistent cash flow and easy does it renewals… again this is only a $5.5b company… it could double in size at a rather rapid pace… no wonder this stock is galloping.

These moves, these so called surprises, were telegraphed in advance… they were telephoned for heaven’s sake… Lady GaGa/Beyonce style… but the analysts were not listening… the surprises? They are surprised because the analysts have allowed themselves to be surprised… I call them sanction surprises… we on Mad Money do the opposite… it is why these Cramer fave situations like Whirlpool, Netflix, Chipotle, Deckers and Cat might elude the incredibly overpaid Wall Street researchers… but they should have been anything but surprising to you at home.

Here is the bottom line…

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Now that you know what is behind the mystifying fact that anyone is mystified by these quarters, well, maybe you can anticipate better… analysts who do not update their numbers during the quarter… and do not nail the top down improvements in the consumer and emerging markets with the franchises that they cover, are the fodder for the moves in a Whirlpool, or a Deckers, or a Caterpillar, or a Netflix, or a Chipotle… the big non-surprise surprise party, no wonder these big money managers cannot beat you… they are relying on the people who are the most surprised… so they get blindsided... I do not want that happening to you.