Jailbreak! I am talking about how this market’s burst out in so many areas that you have to marvel it’s even possible.
It may be true that you can’t judge a book by its cover, but you sure can tell a market by what’s up the most and this market is yelling, no, screaming, that everything’s working.
I don’t want to waste your time, so when I saw jailbreak, I want to describe how literally everyone was let loose and you can judge for yourself how marvelous Thursday really was.
Let’s use some expedience. I chose a moment when the president was speaking about the surprise infrastructure bill, the ones that we thought couldn’t occur.
Number one is Eli Lilly (LLY) . And this is real important. The Food and Drug Administration granted Eli Lilly fast track designation for it Alzheimer’s drug. This is amazing, because there was lots of grumbling in the medical community recently that Biogen (BIIB) , which was first in a positive designation for its Alzheimer’s drug. I know Dave Ricks, the CEO, came on “Mad Money” not that long ago and predicted this. Then we got some news that was a negative readout and the stock decline 30 points. That stock is now up 50 points, 15 along Thursday, on this huge designation. That this FDA said yes tells me we are going to get lots of drugs fast-tracked. You literally can pay more for drug stocks after this news. Congrats to David Ricks.
Next up, Tesla (TSLA) . A market led by Tesla is a market where big growth is back. Tesla’s in the dog house ever since the spike from when it joined the S&P 500. Now it’s back and I think you can see a long runway now that it looks like its competitors aren’t ready for prime time.
United Rentals (URI) and Caterpillar (CAT) have been lagging, because we had all given up on infrastructure. But when you get a $579 billion bipartisan agreement bill, it’s pretty incredible. Perhaps there is a way to get the two parties together. These two companies had seen their stocks crushed by the lack of a deal. No more.
United Rentals has a fantastic business, a roll-up of dealers that have created a network par excellence. Caterpillar? When you ask CEOs whom they admire, Jim Umpleby’s name comes up more than just about any other. He’s running a company with discipline and no compromises. He is the first CAT CEO I can remember that thinks of the shareholders in the same breath as the dealers and the customers. Oh, and those higher steel prices? Their products are so good they can pass off the costs.
Here’s an insane one: Darden (DRI) . Yes, Olive Garden. I thought restaurants had inflation problems. I thought that they had help problems. Can’t get workers. Looks like what we really have is last man standing. So many restaurants went under that Olive Garden’s the winner and new champion. I like those Long Horn Steakhouse numbers. Yes, Olive Garden was almost even to 2019 — amazing in itself — the LongHorn was up 13% over 2019. To me this was the lay-up of the line up. My Long Horn has great service and a killer bloody Mary as well as a pretty decent steak. Even my critical wife liked it. Left a big tip.
Rocks. Aggregates. Can’t get enough when you are building roads. So Vulcan Materials (VMC) comes on strong, another stock that had been crushed on the Capitol give-up.
You have to love a market where Align’s (ALGN) near the top. Align’s about straight teeth, something that was once about teenagers, but is now about boomers. We have heard endlessly about the challenges to the company. Where are those challengers. Have you seen them? I am debated getting fitted. And I had braces.
I love seeing Wells Fargo (WFC) in the Top 10. You know the results of the government’s stress tests Thursday. The bank that has the most to gain is Wells. If they get the greenlight they can buy, perhaps 13% of the company. It could be huge. It’s deserving to be in the Top 10. You need a bank in there to round the group up.
Then there’s the last two, the two we need so badly to make sure this is a real jailbreak: Qorvo (QRVO) and Skyworks (SWKS) . This market has lacked semi leadership save Nvidia (NVDA) for weeks now. Did you know Nvidia the Second bit me yesterday? I took it as a sign of strength.
But I wanted Qorvo and Skyworks on the list because you need to see cellphone semis to gain steam. Without these semis you are not going to have anything tech beyond FAANG.
So what so we have here? Drug, high growth tech, infrastructure, dining, vanity, bank and cellphone semi.
Oh la la.
Why is this list so important? Because we needed to shake the rotational aspect of this stock market. It’s been all zero sum: tech or no tech or growth vs. value. Or it’s been a market led by oil which means inflation and a tax on the consumer. Those aren’t jail breaks, those are selective parolees from the bear house.
Until now, we had pretty much given up on the federal government doing anything more for the consumer or the economy than the COVID stimulus, which, while bountiful, is about to run out. All that’s left is a bountiful child credit, which matters and should be a gift to Target (TGT) , Walmart (WMT) , American Eagle Outfitters (AEO) , Costco (COST) , the usual retail subjects. The idea that something else can be accomplished gives people hope that the government will be able to govern. That alone is a price to earnings multiple enhancer. We had gotten so used to rancor and getting nothing done other than attacking big capitalization tech. I was beginning to believe that we had lost the federal government as a source of any good news … until now. A beneficent FDA. An infrastructure bill. Money for roads, for buildings for construction equipment. It’s all good.
The other day I made the statement that we are in a benign moment, with little news and a lot of time on our hands to do nothing, except wait for anything to react to. That meant for weeks we only reacted to the Fed, like comments last Friday from a non-voting Fed official saying that we may have to pull forward rate hikes, something that was directly contradicted by the Fed Chief earlier this week. I mean how many times can you sell stocks because of rising freight costs for heaven’s sake. Does everything have to come down because of steel prices and supply chain issues?
With the Fed out of the picture for a few days the only thing we had to trade off of was surprise good news from the Fed, much better than we could ask for.
Now Friday is a Russell Rebalancing. We don’t know what’s going to happen. It could be terrible like a similar rebalancing from last week. We know that money will have to come out of a bunch of stocks to pay for the meme stocks. Could cause a decline. Yet, I think that this time the decline will be bought, because the moment is benign and people want to put their spare dollars to work. The jailbreak manifests the buying power. Whether it be a drug with a potential blockbuster, or a last man standing restaurants, or cellphones, a challenged bank or straightened teeth, I’ll take it.
(COST, WFC, NVDA, WMT and AEO 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.)
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