Many analysts have turned bearish on stocks after the six-year bull market that has seen the S&P 500 index soar threefold.
But these people just don't get the success of U.S. companies, argues
CNBC commentator Jim Cramer.
"We don't have enough respect for execution," he said on his "Mad Money" show. "Nobody talks about it, about the sheer power of execution, of a management team fulfilling unmet needs or changing course during changing times. Yet it's a huge part of this terrific, long-term rally."
There is much talk of stocks being overvalued. But "many of these stocks belong to companies that are managed by people who are capable of going well outside what's expected them, rendering their stocks cheap, even as they seemed very expensive," Cramer said.
"It is all about execution. There are well-run companies that are underestimated. And yes, contrary to popular belief, undervalued."
The S&P 500 index had a trailing price-earnings ratio of 18.95 as of Feb. 27, up from 17.87 a year earlier, according to Birinyi Associates.
Star hedge fund manager
Doug Kass, president of Seabreeze Partners Management, is one of the bears.
"My market view remains negative, and I am positioned defensively," he wrote on his blog. "Thus far, the market is indifferent to what I have seen as a deterioration in the macroeconomic trends and to rising geopolitical threats."
Traders and investors have pushed stocks higher, "despite a material decline in corporate profit expectations (caused by lower oil prices, a stronger U.S. dollar and slowing global growth)."
Analysts predict profits will fall 4.9 percent in the current quarter, according to Bloomberg. That compares to a 3.7 percent increase in the fourth quarter for the 485 S&P 500 companies that reported as of Friday, according to FactSet.
In addition, "sentiment is elevated, as the bull market in complacency has hit a new high, and many of the most important valuation methodologies are seriously stretched, including Shiller’s CAPE," Kass explained.
He was referring to Robert Shiller's cyclically adjusted price-earnings ratio, which exceeds all periods except 1929, 2000 and 2007, which preceded crashes.
"The confluence of the aforementioned fundamental, sentiment and valuation issues can potentially be considered the Golden Triangle of the Bear Case," Kass noted.