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Investors eager for American initial public offerings in China may repeat the same mistakes made when a similar trend played out in Japan back in the late 1980s and early ‘90s, Cramer said Wednesday.
“It didn’t work the last time around,” Cramer said, and he doubts it would now.
A UBS report released today discussed the potential for US firms, such as Wal-Mart [WMT
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] or Coca-Cola [KO
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], to hold IPOs in China. Often times companies like to finance in the currency of the region in which they operate, and an IPO would offer that chance. Also, China’s price-to-earnings multiple of 28 is much more attractive than that of the US, which is about half that number. So listing there brings with it a near instant pop in share price.
Cramer’s problem, though, is that the very same strategy was tried in Japan and failed. Whatever early-stage gains these stocks saw were eventually given back, he said, and “over time they all dropped out.” He wondered if the interest in UBS’ report was just a fad, as investors chase higher multiples overseas. He urged viewers not to buy the stocks of companies that may list in China, even though some investors might.
Elsewhere, the market seems to be driven by those who believe the economy will recover and those that do not. After three down days for commodities, the glass-half-empty camp seems to be in charge. Hence the jump in TJX [TJX
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] today. Cramer’s favorite play in the group in Family Dollar [FDO
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] because it has more room to run.
The other way to play a potentially longer recession, Cramer said, was through high-growth biotech. Wall Street seems to agree, as Genzyme [GENZ
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] and Celgene [CELG
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], both companies that has underperformed recently, are up significantly in Wednesday trading. Cramer thinks investors also might be less concerned with President Obama’s health-care overhaul.
Lastly, Cramer reiterated his call on Bank of America [BAC
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] as the best play on the housing bottom. He emphasized, though, that a bottom does not mean home prices will immediately start their climb back up to their bubble-era levels. He thinks only that the declines are done, and the sector has found a floor.
Cramer's charitable trust owns Bank of America.
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