Cramer: For Stocks, 2010 Is All About Earnings
On Friday, Cramer laid out his Game Plan for the coming week. Read on for the top trades, key earnings announcements and economic-data reports to watch.
On Monday, Alcoa will kick off earnings season after the closing bell. AA will set the tone for the market, Cramer said, because in 2010, unlike the five previous years, individual company performance will matter more than commodities. Just look at UPS and its fourth-quarter guidance raise today. That most likely saved stocks from the bad news we got regarding unemployment.
Cramer expects good things from Alcoa, thanks to what he predicted will be increased demand for aluminum. Given that the company is exposed to everything from office and autos construction to consumer products and aerospace, the industrials should extend this week’s strong performance into next.
Ever the contrarian, Cramer is hoping for KB Homes on Tuesday morning to report disappointing numbers. But there is a method to his madness. A slow quarter for this company means that fewer homes are being built, and lean inventories are crucial for the housing recovery. So while many on Wall Street may see negative earnings as an ominous sign for the sector, Cramer said it’s exactly what we want. In fact, he recommended buying the two largest homeowners in the country – Bank of America and Wells Fargo – if that happens.
The Federal Reserve on Wednesday will release its Beige Book. A lot of people disregard these central-bank reports, but Cramer scrutinizes them all. He knew to endorse the industrials late this summer once the Fed’s negative statements about them disappeared from these releases. He promised to interpret the Beige Book for Mad Money viewers on Thursday, but urged them to do their own reading beforehand.
On Thursday, Intel , one of Cramer’s favorite stocks for 2010, announces earnings. Both the mobile Internet and Microsoft Windows 7 are driving business, but still no one – other than Cramer – is expecting either a good report or positive outlook. Consider using that negativity to your advantage and possibly buy ahead of the quarter. You could make some money on this near $21 stock and its 2.7$ dividend yield.
Lastly, there’s JPMorgan Chase on Friday. Look for this bellwether bank to talk up improving credit conditions, peaked loan defaults and an overall sense that business is getting better. Also, Cramer said that this would be the first quarter to show how strong JPMorgan is without competition from Lehman Brothers and Bear Stearns, or those nagging TARP repayments. As a result, he thinks JPM should go to $50 soon after the report.
What’s the takeaway? This year is all about earnings, and so is next week’s Game Plan.
“Because at last that’s where the money is,” Cramer said.
Cramer’s charitable trust owns Bank of America, Intel and JPMorgan Chase.
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