Cramer finds a not-so-sexy stock that's definitive of the market rally
Investors may worry about what is causing the stock market's monster rally, but Jim Cramer insists that it is all about boring stocks like financial technology player Equifax (NYSE: EFX).
Shares of Equifax, one of the country's three biggest credit reporting agencies, have been on fire, rallying almost 20 percent in 2017 and far outpacing the S&P 500 (INDEX: .SPX) index over the last five years.
How? Equifax makes money from the fees it collects from banks for checking customers' credit scores, selling software to help banks do that, providing workforce solutions for companies' human resources departments, and selling subscription-based credit monitoring and identity theft protection to individual consumers.
The company also uses data and analytics technologies to provide unique insights on over 820 million consumers and over 91 million businesses around the world.
"If all of this sounds really dull, that's because it is. If you want to put someone to sleep, start a conversation about credit scores," the " Mad Money " host said. "However, this market loves dull. Equifax is exactly the kind of boring, slow-and-steady company that's been embraced by Wall Street lately."
Founded over 100 years ago, Equifax's stock has caught fire lately thanks to the company's accelerating revenue growth and consistently rising operating income.
The growing importance of data has helped the agency sustain its growth levels, as consumer lending platforms like SoFi and LendingClub, which use computer algorithms to streamline lending, pop up across public and private markets.
"But these algorithms only work if they have huge piles of data, and the best data you can find here is the kind of consumer credit info that's Equifax's bread and butter. And it's not just the banks," Cramer said. "These days, everybody wants to see your credit score, from car deals to phone companies to advertising agencies who want to ... do more targeted marketing."
That is how Equifax, along with its competitors TransUnion and Experian, has had such a strong run. Add in Equifax's good management team, which has pursued growth at nearly every turn and made a series of small but smart acquisitions, and Cramer is a big fan of its story.
Equifax will issue its quarterly earnings report next Thursday. Last quarter, the stock pulled back slightly despite a strong report when management gave somewhat conservative guidance, so Cramer thinks earnings might provide an opportunity for investors to get into Equifax.
"Here's the bottom line: this rally is not just about the stocks of sexy, high-profile companies like FANG," the "Mad Money" host said, referring to his acronym for the red-hot stocks of Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX) and Google, now Alphabet (NASDAQ: GOOGL). "It's about boring, slow and steady companies that just don't get enough appreciation from investors, or certainly from the media. Stocks like Equifax. I think there's more upside here. My recommendation is that you buy only a little at these levels just in case the stock pulls back after Equifax reports next Thursday, at which point I would be more aggressive if it came in.
Watch full segment: Boring, dull, un-sexy...and a buy?
Disclosure: Cramer's charitable trust owns shares in Facebook and Alphabet.
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