Big fund investors are willing to pay up for a stock, as long as the underlying company can back it up with visibility, CNBC’s Jim Cramer said Friday after another week full of earnings reports.
Visibility is Wall Street lingo referring to a corporation’s projection of future performance.
“Listen for that word: visibility. If the company has it, I bet it’s a stock worth buying,” the “Mad Money” host said, emphasizing it “allows the analysts to model the future with more accuracy.”
Executives of publicly traded companies were less willing to give an outlook in the wake of the Great Recession that tanked the market over a decade ago. Company forecasts were thrown out of whack during the global financial crisis, Cramer said, which was brought on by a crash in the U.S. housing market.
Over the course of the Great Recession, from December 2007 to June 2009, the S&P 500 fell about 35%. The broad index of 500 large-cap stocks at one point lost more than half its value, bottoming at 666.79 in March 2009, according to FactSet. The Dow Jones Industrial Average and Nasdaq Composite both suffered comparable declines in the same timeline.
Since the mid-March bottom, the S&P 500 has rallied almost 530% through Friday’s close, FactSet said, in the longest bull market on record.
“Now, though, visibility’s making a comeback. Maybe enough time has passed, maybe business is just better. I don’t know,” Cramer said.
The former hedge-fund manager often advises against buying a stock that rallies in the days leading up to the company’s quarterly earnings…