On Jim Cramer’s Mad Money, he has been talking a lot about why the US markets are still relatively strong in spite of the state of the rest of the rest of world’s economies. A big reason for the buoyancy of the markets is the work of the Federal Reserve. As Cramer explains, when the Fed Reserve cuts interest rates so low that most dividend yields are greater, investors can move to larger cap dividend-yielding stocks, bolstering the markets. This may not have been Federal Reserve Chief Ben Bernanke’s intention, but it is the result. In that environment, if you try to go bearish and shirt the market, you could lose big.
Aside from anything else – some stocks are virtually recession-resistant. They are the brands and companies that can weather a storm because of their industries or a unique product. Apple, Inc. (AAPL) is one of those stocks. People still buy those products regardless what is happening in the economy. How else could AAPL sell over one million iPhone 4S’s on the first day? As Cramer puts it, they are “hardly hostage to anything, let alone Europe.” They are companies “trade on yield, not earnings” or that already have full order books. In any case, they are the stocks that Cramer says make “terrible shorts.”
Here are 12 stocks Jim Cramer says make terrible shorts:
Cramer calls Exxon Mobil Corp (XOM) “a terrific play on the price of energy.” As he puts it, “Brent Crude is not coming down.” XOM is a favorite pick of Ken Fisher. He keeps over $584 million of his Fisher Asset Management fund invested in XOM.
Next up, take Johnson & Johnson (JNJ), Merck (MRK) and Pfizer (PFE). They are huge drug companies that are slow and consistent, so much so that they are practically like bonds that offer a little greater dividend yield on the upside. It’s no wonder that they are so popular with hedge funds. For instance, Warren Buffett has $2.8 billion of Berkshire Hathaway invested in JNJ. Merck is popular with Ric Dillon, who has more than 2% of his Diamond Hill Capital fund invested in the company. Pfizer also warrants heavy stakes. David Einhorn has over 10% of his Greenlight Capital fund invested in PFE.
Then you have companies like Boeing (BA), United Technologies (UTX) and Caterpillar (CAT). They have full order books. Sure something could happen, but is it likely? – No. Ken Fisher’s Fisher Asset Management fund has a $381.9 million stake in BA. Coming second amongst funds we track is Phill Gross and Robert Atchinson’s Adage Capital Management. Over $149 million of that fund’s portfolio is invested in BA. Both Ken Fisher and Ric Dillon are bullish about UTX. Their funds have $555 million and $261.6 million positions in the company, respectively. Ken Fisher’s fund is also invested heavily in CAT. It holds a $480.3 million share. Adage Capital is also a fan of CAT. It carries a $136.7 million position in the company
Then there are companies like Intel (INTC), Microsoft (MSFT) and Cisco (CSCO). They may be low but they also have decent enough yields that they make terrible shorts. They also have some interest from the hedge fund world’s biggest players. Ken Fisher is there again. His fund has over $431 million invested in INTC. MSFT fares just as well. Ken Fisher’s fund has a $464 million stake in the company, while Boykin Curry keeps more than $498 million of his Eagle Capital Management fund invested in MSFT. CSCO also gets a fair amount of attention from fund managers. Jean-Marie Eveillard has more than $483 million of his First Eagle Investment fund in CSCO.
Lastly, there are the stocks of Verizon (VZ) and AT&T (T). They just are not stocks that investors can short based on issues in Europe. Adage Capital is a fan of VZ, as is Jim Simons. He has more than $114 million of his Renaissance Technologies fund invested in VZ. Adage Capital is also bullish about AT&T. It has a $318 million position in the company.