What Went Right in 2007
It’s easy to get depressed when the Dow drops 221 points on the first trading day of the year. And who could blame you if you were. Gold’s headed north, the economy’s in danger of heading south, oil cracked $100 a barrel, and Thursday’s the first stop on what Cramer said could be the Democrat’s march to the White House – and Wall Street tends not to like the Dems.
But there’s always a bull market somewhere, Cramer says, and even this horrible tape is no exception. The rising price of oil should keep that sector, infrastructure and ethanol healthy into 2008. And if Homegamers just add some gold stocks, which the Mad Money host had been suggesting as insurance anyway, there’s a chance to bank some profits. Cramer likes Barick for “mainstream gold,” he said, and Yamana for growth.
To keep viewers positive, focused and on the moneymaking path, though, Cramer spent Wednesday’s show reviewing the good and the bad of 2007, then offered advice on where to go next. The focus was on the nine stocks of the year – three value, three growth and three speculative – he picked last January.
For value, Cramer liked Goldman Sachs , Altria and Halliburton , which were up 8%, 16% and 27% for the year, respectively. For growth, Cisco Systems dropped 5%, Apple surged 131%, and NYSE Euronext finished down 8%. Savient Pharma was a speculative pick, until Sept. 28 when Cramer recommended switching out of the stock for BioMarin. That move would have earned Homegamers a 77% return. The other two spec stocks, Rite-Aid and Level 3 Communications, were down a whopping 50% and 49%, respectively, but it wasn’t enough to hurt the whole portfolio. Cramer’s stocks were up an average of 16% for the year compared to the S&P 500’s 4%.
So what were the lessons learned? Contain your losses, and your winners will win, Cramer said. There weren’t any big losers in the growth and value groups, and Apple and Halliburton took care of the upside.
Stick with the winners, too. Apple was a great stock in 2006, and the trend continued with the iPhone release in 2007. As long as Steve Jobs’ company keeps growing earnings at 30%, Cramer said AAPL is a stock to own in 2008.
Another thing to keep in mind is that sometimes even the worst stock in a good sector is worth owning. There were plenty of better plays in oil services, but Halliburton still managed to return 27% to investors.
Also, slow and steady can win the race in investing as well. Altria was a boring stock, for the most part, that Cramer liked as a weak-dollar play and for the dividend, but it beat the averages handily.
Lastly, “biotech is the true stuff of dreams,” Cramer said. It’s high risk, for sure, but it’s high reward as well. Both Savient and Biomarin were big winners in 2007.
Jim's charitable trust owns Altria, Goldman Sachs and NYSE Euronext.
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