The market is so obsessed with technology that it cannot see the forest through the industrialists. If the talk isn’t about the cloud slowdown, it’s about who is stepping down from the now-private Twitter, or how disappointing it is that co-CEO Bret Taylor has left Salesforce (CRM). Mark Zuckerberg of Meta Platforms (META) might sneeze and Amazon (AMZN) CEO Andy Jassy cough and that’s bigger than United Airlines’ (UAL) order for 100 Boeing (BA) Dreamliners. We no longer pay much attention to manufacturers. There aren’t that many. We are used to them being hostage to so many forces of negativity that they are simply not worth our attention. It’s wrong. The Dow Jones Industrial Average has done so much better than the average semiconductor company, or even the above-average enterprise software company, that it makes no sense for us to even focus on some of the latter. The 600 companies created in the last two years are renting too much of your brain space, even in passing. Advertising, which has proven to be the Achilles heel of the entire internet and media, seems to have disappeared. There isn’t enough to feed every gamer’s mouth and no one seems to be able to reach 18-24 year olds with what they spend. So they are paying a fraction of what they were spending before. It’s so bad that we cheer when a semiconductor company like Marvell Technology (MRVL) goes down and the stock drops only slightly. This gives the market hope that some of the chip inventory glut is coming to an end. In the meantime, unheralded industrials swerve on any run of the S&P 500, where there never seems to be enough stock ahead where you find sellers. I’ll address the intriguing ones – but first let me say that the biggest problem with so many of these technologies is that there is so much on offer across the board. Someone is always a salesperson. There is always merchandise for a penny. And it is substantial. The orders, if you could hear them, would be something like “sell 50,000 shares every five cents or so for the next dollar, then I’ll reload when I get my report if there’s enough time left at the end of the day . I don’t want to hurt the stock too much because I have so much behind.” There are endless sales in everything cloud and it’s not just because of price target reductions. This comes from insiders who feel the era is over and they are all competing now, even Amazon, Alphabet (GOOGL) and Meta have figured this out. When the biggest issue with Meta is how long Zuckerberg is really working on his alleged pipedream metaverse, instead of the highly profitable but slowly growing Instagram, you know you’re way too deep in the weeds. Now I want you to reach Caterpillar (CAT) stock. When you’re in the deep stages of a Federal Reserve interest rate hike, I’d normally say that’s perhaps the best short in the book. Shorting a stock means betting that it will go down. But not this time. There is no way for CAT to respond to his commands. Every industry needs more of what it produces, whether it’s coal because Europe has shut down so many nuclear power plants and the price of natural gas has risen so much, or earth-moving machinery needed for all the roads that are about to be built in this country because of the Democratic infrastructure bill, which favors the domestic product. During this time, its gross costs decrease. Caterpillar has focused on China and focused on oil and gas. While state-owned companies have reduced the pace of drilling, private equity firms are drilling like mad to hedge cash flow. Take a look at how CAT acts on bull days. There are none for sale. None. A decent day and it still looks like the Caterpillar stock has gained three points. Why not; there are 527 million shares outstanding, down from 20 million shares. What enterprise software company can say that? There are no stock-based compensation issues. Stocks are valuable. CAT sells at 17 times REAL profits, not FALSE or MADE UP profits. It’s what we really should call the brazen nonsense of the non-GAAP adjusted earnings per share we’re getting from these West Coasts, much like what General Electric (GE) was doing before it collapsed. I bet a buy order for 100,000 shares of Caterpillar moves it 2 points. In a year the S&P 500 fell 14%, CAT has gained 14% year-to-date. Not to mention that it has an annual dividend yield of 2%. Last week, I met with the CEO of Emerson Electric (EMR), Lal Karsanbhai. It transforms this old but excellent manufacturer of valves and appliances into a company that digitizes your equipment, automates your factories while reducing waste. In less than two years, Karsanbhai has sold off slow-growing divisions, bought up faster-growing businesses, and co-created others in ways arrogant software types can only dream of doing. Like the Caterpillar stock, EMR is up: 4% more since the start of the year. But over the past three months, shares are up 18.5%. I think the idea of calling on an Emerson to innovate and automate and get cleaner – he also has a huge business in improving the environment – is one of the first calls I would make if I were running a industrial. That’s an 18 times earnings stock. Everything that happens to Boeing, I’m always bittersweet. We sold high prices, we sold low prices, but mostly we were just annoyed by his constant mistakes. We wanted to play aerospace, with so much travel, so we did it with Honeywell (HON). Here is another story that never ceases to amaze. Another company reconfigured with chemicals that clean up the refining process, machines that automate factories, air conditioning controls and some of the most important parts of an airplane, including the cockpit, not just for Boeing but for Airbus. . Honeywell stock is selling at 25 times earnings, but its growth is accelerating and it has cash and a balance sheet ready to be put to use for whatever is needed. HON is another that has risen 5% year-to-date and more than 17% in the past three months. We know that we have gone through arsenals of low-tech military equipment, just like NATO. But this big increase in credits last week is going to give Raytheon Technologies (RTX) the orders it needs to increase the numbers for 2023. I think the anti-missile products that Raytheon specializes in are now directed to members of the NATO to do whatever they want with them, which means taking them to Ukraine to defend against Russia’s nine-month invasion. Meanwhile, Raytheon Aerospace, both military and commercial, has too many orders to handle. After some reconfiguration as part of the merger between United Technologies and Raytheon, the takeover is in place. The only thing holding this company back is the lack of engineers. Can people in the West learn military engineering? They better learn how to do it. RTX is up 17% year-to-date. I could include so many companies like these, Eaton Corporation (ETN) for pumps, valves and what you need for electric vehicle charging; Illinois Tool Works (ITW) for equipment such as welding, automotive and polymer growth share, and all kinds of high-demand products; or Agilent Technologies (A), a test and measurement company for all kinds of industries that need precision and accuracy. You cannot own them. You won’t know when they stop going up. And you can’t just buy them. Jeff Marks, Portfolio Manager for the Investing Club, and I went there last week when I said we just gotta, gotta own Emerson as fast as we can. But a look at the stock tells us it’s gone too far too fast. The thing is, they all did. I’m saying let’s take a serious break from the software companies who claimed to have eaten everything else for breakfast and start discussing the real winners since the November pivot – the companies that were supposed to collapse which, instead of that, have reinvented themselves and are part of the new industrial economy that has automated and digitized and does not need customer relationship management because it has too many customers. (Jim Cramer’s Charitable Trust is long CRM, META, AMZN, GOOGL, and HON. See here for a full stock list.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a shop. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Jim Cramer at the NYSE, June 30, 2022.
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The market is so obsessed with technology that it cannot see the forest through the industrialists. If the talk isn’t about the cloud slowdown, it’s about who is stepping down from the now-private Twitter, or how disappointing it is that co-CEO Bret Taylor is gone. Selling power (CRM). Metaplatforms‘ (META) Mark Zuckerberg could sneeze and Amazon (AMZN) CEO) Andy Jassy coughs and it’s more important than United Airlines‘ (UAL) order of 100 Dreamliners from Boeing (BA).
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