Cramer got a bit cocky after the success of a few of his recent Game Plan picks, and he paid for it. While riding high on good earners like Jack in the Box, Chipotle, Foster Wheeler and McDermott, he forgot his golden rule – no technology stocks before August.
Now Cramer’s eating crow as CA is down over 7% since he recommended it last Friday and Merrill Lynch downgraded Analog Devices yesterday. He thought CA was in the clear now that the accounting scandal has passed, but the company’s fundamentals just don’t measure up. Besides, software at this time of year? No way.
ADI was a case of Cramer just not being able to restrain his enthusiasm. Texas Instruments – number one to ADI’s number two in the semiconductor sector – posted strong numbers and tech on the whole had gone up. Then Avnet’s CEO came on the show and told Cramer the semi inventory correction was over. All bullish indicators, as far as he was concerned. But that Merrill downgrade showed that opportunities in its core markets are shrinking, and the new markets it is embracing aren’t growing fast enough and have lower gross margins. Oops.