So the bears were serving bull meat in the market today. But remember: Every down day creates an opportunity to buy. So Cramer’s recommending you ride this breakdown into some well-run financial companies.
Goldman Sachs , Bear Stearns , Lehman Brothers , Merrill Lynch and Morgan Stanley each hold the perfect elixir for profits right now: one part management, one part valuation and one part price.
The management teams running these brokerages, as far as Cramer is concerned, are to die for. Stan O’Neal at Merrill, Dick Fuld at Lehman, Jimmy Cayne at Bear, Lloyd Blankfein at Goldman and John Macke at Morgan are the best group of managers he has ever seen.
This is a good start, but it’s not enough. Let’s look at valuation. Even though these are some of the best-run companies on earth, all five brokerages are trading at a discount. The average S&P 500 stock sells at roughly 14 times earnings. Goldman, Lehman, Morgan, Merrill and Bear sell between 10 and 12 times earnings. That’s hard to believe, Cramer says. Don’t expect the discount to last.
And that brings us to the final, and most important, factor – your entry point. These stocks have taken a hit for four days in a row. Bear’s down from $172 to $154, Goldman from $222 to $207, Lehman from $86 to $74, Merrill from $98 to $84, Morgan Stanley from $84 to $76. Those are the kind of pullbacks that you need to be on the lookout for. They give you an opportunity to start putting your money to work in one of these great names.
Cramer’s personal favorite is Goldman, but any of the five will do. Just know that they haven’t seen a bottom yet. These stocks will probably keep coming down in the near future. But you probably want to get in them at all levels because these are the companies that know how to handle buybacks and risk, because their CEOs have seen it all. You can trust them in a crazy, turbulent and nasty market like the one we've got now.
Bottom line: Goldman, Lehman, Bear, Merrill Lynch, Morgan Stanley – they’re all in nirvana, and it's time for you to take this terrifying breakdown as an opportunity and buy one of them. Don't throw caution to the wind, don't buy all at once – but history tells us you should be buying something in the next week – and the five big brokers are it.
Jim's charitable trust owns GS.
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