Cramer on Infrastructure Stocks

I am once again aghast at the reaction to Fluor (FLR) earnings - either we are heading for the type of global recession no one can fathom or the hedge fund liquidations are continuing hot and heavy. And if its the former, trust me, buying anything in the US just because "we'll be the first to recover" is simply a fool's game. I continue to ask where the next leadership group will be if we are going to bludgeon these names with true earnings power and a global growth bent - sorry a market led up by retailers, financials, and airlines in an economy that is just now really beginning to face a recession is not an arguement I am buying for any period of time (other than an oversold bounce). I'll take responsibility for being "wrong" the past 7 weeks but we've seen similar rallies last fall and early spring on "hopes for a US recovery" before the bottom fell out. I contend we'll see another, and the higher this "junk" rallies the better for the eventual shorting opportunity.

As to the infrastructure stocks - as always it is not the news, but the reaction to the news that matters. This reaction is awful but in this day and age I can no longer tell if its selling by humans or simply algorithms selling, so hard to 'read' anything into the reactions. But this is simply a market like no other - I continue to see the type of awful reactions reserved for stocks that completely miss earnings, while the companies missing earnings are rewarded with 30-50% gains in a month. I know its all "buy the loser thinking since everything reverts to a mean" but the velocity and relentlessness of said moves is beyond compare of anything I've seen in 12+ years. Company after company, we are seeing entire years worth of gains disappear... and these are not the ones with exposure to subprime or systematic risk. Again, either they are telegraphing the type of global recession where we want to own nothing but gold or this is just massive liquidations in the hedge fund community.

I am copying this from Cramer simply because it pretty much summarizes my thoughts tick for tick. I wrote yesterday

As for Fluor (FLR) it is making a valient effort to hold the 200 day moving average ($77) but its peer group is being systematically dismembered since the world is heading for the abyss ... err the world ex the US of A which will thrive as it decouples from the rest of the world. The stock is trading near $80 in after hours but we have to keep a very tight leash on this because if the stock breaks down, it has potential to follow the death spiral of its peers. Despite the fundamentals

I'll point out below I continue to be perplexed by Foster Wheeler - it posts similar growth numbers to Fluor but trades at 14x instead of 24x earnings. Backlog is not growing quite as fast, but why it trades at such a discount is a great question.

Cramer writes

Foster Wheeler (FWLT - commentary - Cramer's Take), Fluor (FLR - commentary - Cramer's Take) and McDermott (MDR - commentary - Cramer's Take) are in free fall, and while I was disappointed in McDermott's earnings, I am miffed that FWLT and FLR, which had really great backlogs and earnings, can't get any support at all here.

Fluor, first of all, guided up very big, one of the biggest I have seen, so for this stock to be down 10% seems absurd. Foster Wheeler now trades at less than one time its backlog, a solid backlog put on mostly when oil was substantially lower, so there is almost no chance of cancellation.

Yet nobody cares because of the price of crude.

This is a market that loves and hates with such passion that you have to ask yourself if this is the moment when you have to start buying and putting away stocks that sell at valuations that make no sense unless oil is going to $60, which is how I feel with these two.

It is also how I feel about National Oilwell Varco (NOV - commentary - Cramer's Take), with an order book that, again, is the envy of the industry and, again, just needs natural gas above $7 and oil about $70 to make the numbers for at least the next three years.

Unfortunately, the pain of sticking with stocks like Fluor and Foster and National Oilwell is beyond the ken of most mortals.

These are not dot-coms. There is some worth here. But nobody cares. One day they will. The trick is to remain alive and in the game until they do, because we know, from the banks, that when they turn, and they will turn because their businesses are, long term so excellent and steady, you will not be able to get into them. You will, by nature, be too late.

Sometimes you have to lose some big money to make some bigger money. That's how I feel about these stocks at these levels.

But boy do I feel lonely.