The Dow’s peak in January – 10,725 – seems to be a critical level in a lot of investors’ minds. The number serves as a psychological barrier of sorts. If stocks can break through it, they say, then the next leg of the bull market will begin.
Cramer doesn’t disagree. But he is quick to point out that a number of companies are making it incredibly hard for the Dow to regain the points it has lost. On Tuesday’s Mad Money, he highlighted all 10, telling viewers what to expect from them and whether we’ll see Dow 11,000 anytime soon.
First up, American Express , which is down 2% for the year. Cramer thinks this $40 stock could rally, though, given the company’s strong performance in the most recent quarter, its successful handling of new credit-card legislation, a thriving retail environment and the return of corporate travel. His price target? $45.
Then there’s Exxon Mobil , off 2.1% so far in 2010. With oil stuck at $80 a barrel and no real catalyst for the stock until the XTO Energy deal closes, Cramer doesn’t expect much from the stock. At the most, he predicted XOM could add, at the most, another $3 to its near $67 closing price on Tuesday.
Next, also in the oil and gas sector, comes Chevron , shedding 3.5% this year. Cramer’s charitable trust has been taking some profits, but that’s because management has so many good things to say at Tuesday’s analyst meeting. He still likes CVX and said it could go to $80 from its present level of $74 and change.
IBM meanwhile has lost 4.1% in the past two and a half months. In order for the stock to budge, Cramer said, the company will have to deliver a bullish quarter. And that won’t happen for more than another month. Therefore, IBM most likely won’t be contributing to a move higher in the Dow.
Coca-Cola , down 4.9% since the new year, has struggled because of its bottler acquisition. The same thing happened to Pepsico, Cramer said, so don’t rely on KO to play a part either.
Pfizer , already off 5.3% in 2010, could lose another $1 still, Cramer said. He said the company’s purchase of German generic drugmaker Ratiopharm was a bad move and called out management for not creating value for shareholders with its Wyeth acquisition.
Microsoft could step up, Cramer said, thanks largely to sales of the new Windows 7 operating system. He thinks the stock, down 5.5% for the year, could reach $32 after it’s pinned at $30 on options expiration.
AT&T and Verizon Communications , locked in a price war, also made this list. They’ve given up about 10% each. But Cramer said these stocks could be Dow saviors, especially as the landline business recovers along with the economy. He’s also a fan of the dividends here and said T could inch up to $28 while VZ climbs to $33.
Finally, there’s Alcoa . As much as Cramer likes the cash flows and the aluminum story, he’s all but given up on this stock, which has fallen 15.2%.
Of course, there are plenty of great stocks in the Dow – Cisco Systems, McDonald’s, Bank of America – but without the preceding 10, the index struggle to make a significant move.
Still, the gains Cramer expects from just a few of these names would push the Dow up to 10,729. It may be only four points north of January’s high, but it could be enough to catalyze investors and spark another rally.
Cramer's charitable trust owns Chevron and Pepsico.
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