At this point in the business cycle, every company wants to be seen as a secular growth stock, Jim Cramer told his Mad Money viewers on Wednesday. Indeed, with rising interest rates, no one wants to be considered a cyclical security. But investors should approach such actions with skepticism, as not every company can make such a successful transition.
Many companies have gone from being a cyclical producer to a secular producer, but none have been as successful as Micron Technology. (MU) – Get the report from Micron Technology, Inc.. For years, Micron was just a commodity memory chip maker, beholden to boom and bust cycles of uneven supply and demand. But then the company changed its stripes, branching out into a premium chipmaker for all of today’s hottest markets. Micron hasn’t been able to completely shake off its past though, which is why shares rose on strong earnings on Wednesday morning, only to fall 3.5% at the close as investors feared a slowdown in its forecasts.
Devon Energy (NDV) – Get the Devon Energy Corporation report is another company that has managed to become a secular growth stock. Oil producers were notoriously unruly, until Devon instituted a variable dividend and pledged to return more money to shareholders. Now the company can offer its shareholders stable growth, regardless of the current level of oil prices.
Even companies like Deere & Co. (OF) – Get the Deere & Company report have risen from the boom and bust of agriculture to reinvent themselves as a supplier of high-tech agricultural equipment.
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This is not the case for high-end furniture retailer RH (HR) – Get the HR report, which is always at the mercy of consumer demand. This is also the case for car manufacturers, which will soon suffer as many buyers’ car finance prices go out of the market. Only Tesla (TSLA) – Get the Tesla Inc report seems capable of reversing this trend and continuing its trajectory as a secular growth company.
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