The trick to trading international stocks – CNBC.com
Cramer questions the market’s intelligence
Mad Money host Jim Cramer shares his final thoughts of the day on the latest moves taking the tape, including Micron; Procter & Gamble; Kimberley-Clark and PVH.
Sometimes even Jim Cramer has to admit—the stock market is dumber than a bag of hammers.
This is exactly what he was thinking on Wednesday night when Micron reported an upside surprise and the stock immediately rose. But then as soon as the conference call began, management lowered numbers on account of sluggish chip sales.
Investors quickly realized there was more homework to be done, and it went right back down. Yet somehow the stock ultimately stabilized, closing down just 40 cents on Thursday.
Cramer saw the same actions occur with Kimberly-Clark and Procter & Gamble when BMO downgraded both stocks due to currency exposure. But what the heck are they supposed to do?
That’s exactly what happens when your company is located in the country with the strongest currency in the world, and they got hit hard translating overseas earnings back into dollars. They are also competing with foreign goods that can be offered at cheaper prices made in countries with cheaper currencies.
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Traders work on the floor of the New York Stock Exchange.
“It’s just a total lose-win situation for our international companies: we lose, our foreign competitors win,” the “Mad Money” host said.
But Cramer suspects that these big companies already know that currency headwinds are out there, and have factored that into a certain price. That would explain why both Procter and Kimberly also found a way to stabilize after the downgrade on Thursday.
Judging by the fact that these stocks seem to react fairly positively amid negative news, Cramer thinks that investors could be in for a few positive surprises ahead even if they report negative earnings.
The same thing happened with PVH, which had fallen to $97 from $128 at the beginning of the year mostly due to its overseas exposure. Right before it reported last week, buyers flooded the stock and it continues to climb higher.
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“That’s why you have to stay close to all of these international stocks before they report,” Cramer said.
Ultimately it’s a strange process, and sometimes the market is just plain wrong. But in the meantime, Cramer expects further declines in international stocks and he thinks there will be a reluctance to sell the stocks even if the earnings are hideous.
“I’m betting that the lower these stocks go ahead of their quarters…the bigger the pop will be for those who can manage this sticky currency issue.”
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The trick to trading international stocks – CNBC.com
