Tuesday, January 26, 2021

Jim Cramer breaks down the GameStop short squeeze

 Jan. 26, 2021

Here is the link. 

"Mad Money" host Jim Cramer discusses short squeezes involving stocks like GameStop, but contends the headline-grabbing moves do not threaten the health of overall U.S. equity market. Subscribe to CNBC PRO for access to investor and analyst insights: https://cnb.cx/2Vtntx6 Headline-grabbing short squeezes involving GameStop — and to a lesser extent, a few other companies — are really distractions for most stock market investors, CNBC’s Jim Cramer said Monday. “As entertaining as these moves are, this stuff is ultimately a sideshow. At the end of the day, I don’t think a Reddit forum can bring the house down,” the “Mad Money” host said, referring r/wallstreetbets and other online chat rooms where some retail investors and day traders have sought to drive shares higher and squeeze out short-sellers. In other cases, it’s less about busting short-sellers and targeting companies that are “genuinely loved” such as Blackberry and Palantir, both of which had big runs during Monday’s session, Cramer said. Blackberry closed higher by about 28% while Palantir advanced 11%. “They’re picking undervalued stocks that have a big short position and running with them,” Cramer said. “That can cause crazy moves in a handful of stocks, but it’s not big enough to move the entire market.” While it may be causing financial pain for hedge funds and other investors who had shorted the stocks, essentially betting shares will go lower, Cramer said the recent developments in are not what most investors should be focusing on. “What really matters right now is that we have a stock picker’s market for the first time in 20-odd years,” Cramer said. “This is a market that rewards individual companies for being well-run, and that means stocks are less sensitive to the broader economy than they used to be.” To be sure, Cramer said there are some stocks that could hurt the market overall if large numbers of investors decide to sell and take profits after massive runs during the coronavirus pandemic. He also acknowledged that while technology companies have been major beneficiaries of the digital acceleration spurred on by the pandemic, most of the sector has “gotten overheated at these levels.” “The endless price target boosts for the semiconductors and for Apple are very unnerving to me,” Cramer said. “They set a high bar. That could hurt the market. There’s a whole gauntlet of stocks that have roared, from Microsoft to Tesla to Boeing to AMD, and they could really hurt us if they get hit with a big bout of profit-taking.” At the same time, Cramer said there are signs in the market that are encouraging for investors. For example, when a company such as Kimberly-Clark reported a positive quarter, the stock moves higher, Cramer said. “Of course, stocks go down just as much when they disappoint and that’s what happened to IBM last week,” Cramer said, leaning on these examples as evidence of what he believes is a stock-pickers market. That’s especially important for investors to remember during a busy week of earnings, Cramer said, which includes the likes of Apple, Tesla and Johnson & Johnson issuing quarterly reports. “With the exception of a handful of gigantic tech plays, there isn’t a stock out there that’s big enough to bring down this market,” Cramer said. “If anything, the gauntlet of earnings this week starting with J&J tomorrow, which is not at all sensitive to the economy, could be a terrific sign that many big-cap stocks are immune to a slowdown and unperturbed by the crazy action in marginal names like a GameStop or B&G Foods or even a [Rocket Companies] and Bed Bath & Beyond.” » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic


No comments:

Post a Comment