Only the Paranoid Survive?
Even the most sincerely insincere man on Wall Street believes that some CEOs deserve the benefit of the doubt. Not only do they deserve it, but investors can make more money by trusting these guys at times than if they don’t. Sure, this goes against every primitive impulse one might have to get violently negative the moment there’s the slightest scent of blood, but it’s true – especially when we’re talking retailers.
So today starts the beginning of a new series for the week, the “Benefit of the Doubt” list of retail managers whose words you can take at face value. These are the guys who run companies that are worth buying when they miss their monthly same-store sales numbers or slip up one quarter. This is a Cramer-tested way to approach retailers with a time frame longer than just the next 24 hours.
Here’s an example of the thesis in action: Lew Frankfort, CEO of Coach, was on Mad Money last July after it had just missed its numbers, saying it was a one-time deal. Turns out it was, and those who trusted Frankfort and bought back Coach could have doubled their money. And this is why giving a manager the benefit of the doubt is good strategy – it’s not about making friends, it’s a chance to make money.
Topping the list today is VF Corp. CEO Mackey McDonald. Both VF and the Street were hoping to see the company drop its low-margin bra business, and when it happened the stock took a big hit. Cramer had McDonald and COO Eric Wiseman on the show that night and the CEO assured Mad Money the problem stemmed from the weather – no one buys VF’s North Face-branded jackets when it’s 60 degrees out. A month later, the stock was up eight points, the Street loved the loss of the flagship Vanity Fair bras, it’s freezing out and North Face is blowing out the door.
Credibility is a hard thing to quantify, and that’s why the Street hates dealing with management. But the bottom line on this show is that it’s the unquantifiable things, like knowing who deserves the benefit of the doubt, that make winning this game possible. Mackey McDonald at VF Corp. is the first name on Cramer’s B.O.D. list – keep watching this week for more.
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