Forget GM IPO; Buy Ford Shares Instead
With the potential for a rash of interest-rate hikes next week across the globe, from China especially and possibly Brazil and India, the resultant markets losses would make Friday’s decline look tame. Cramer thinks it could force another 2-percent to 3-percent dip. But there is one event coming that could trump the this.
General Motors’ much-anticipated initial public offering.
GM is expected to issues 356 million shares at between $26 and $29 a piece. Most likely it’ll be just too hard for most retailers to get it, so Cramer urged viewers to steer clear of the aftermarket. By then the price will have spiked too much. Besides, a much better buy is Ford .
Ford is the smarter buy, Cramer said. Thanks to CEO Alan Mulally, a masterful turn has been engineered at this once-failing automaker. As a result, Ford has been taking share from GM for the past two years here in the States, a trend that is expected to continue going forward. And while GM has a bigger presence in the emerging markets, Ford has much more potential to grow as it plays catch-up.
There’s no doubt bankruptcy has helped GM’s balance sheet, as the company now holds just $5.4 billion in debt with no big maturities until 2015. Compare that to Ford’s $21 billion. But at the same time Ford, too, has been cleaning up its books and is on track to become net cash positive. Mulally also has better control of his costs and isn’t suffering the same level burden with regard to underfunded pensions: $12 billion in liabilities for Ford versus $23 billion for GM.
Money managers will start to do head-to-head comparisons of these two firms as soon as GM hits the market, Cramer said, and this is what they’ll see. So if GM pops to $35 at the open, a figure that has been rumored, the pros will assume that Ford deserves to go higher.
“Ford is the better company, hands down,” Cramer said, “and given the valuations people are talking about for GM, Ford’s stock should go through the roof.”
Beyond this popular IPO, Cramer also will be watching the earnings reports of Nordstrom and Urban Outfitters , which come Monday. High-end shopping has done well so far, so Cramer’s expecting the same from JWN. Urban, on the other hand, is expected to guide down, making it too dangerous to own ahead of the quarter. He recommended waiting for the stock to pull back, as it makes a better buy under $30.
On Tuesday, he’ll listen to the conference calls of TJX Cos. and Walmart , both great eyes into consumer confidence.
Wednesday should bring with it a strong report from NetApp , a great storage play and, as far as Cramer’s concerned, the number two cloud-computing play behind Salesforce.com .
Speaking for Salesforce, that company announces numbers on Thursday. There’s a lot of bearish interest in the stock, which may end up causing a dip in the share price immediately after the report. If that happens, he recommends using the weakness to buy CRM, as long as the story is still intact. Cramer said he will be on the conference call so he can speak with CEO Marc Benioff to make sure it is.
And finally, also on Thursday, are jobless claims.
“[If] we get below 425,000,” Cramer said, “look out above! That could turn us around from the big China malaise I expect at the beginning of the week.”
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