Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday September 30.
8 Things To Watch In the Coming Week: Yum Brands (NYSE:YUM), Costco (NASDAQ:COST), Monsanto (NYSE:MON), Marriott International (NASDAQ:MAR), Constellation Brands (NYSE:STZ), Ford (NYSE:F), General Motors (NYSE:GM). Other stocks mentioned: Teco Energy (NYSE:TE), Diageo (NYSE:DEO)
After a "hideous" day on Friday when the Dow sank 241 points, investors have to admit that they are hostages to Europe and China. The market has "Stock-holm Syndrome" and must accept the beatings it is going to take from bad news overseas. While earnings from companies might count for something, macro data might change the entire picture. Cramer discussed earnings and data points for the coming week:
China Non-Manufacturing PMI should set the tone for the entire week. This is a very important piece of data, and Cramer is not expecting a strong number.
Ford (F) and General Motors (GM) Sales Calls: Auto sales have not suffered dramatically lately on economic fears, but these stocks have plummeted. Auto stocks are too levered to the fortunes of Europe to render them "buys."
Yum Brands (YUM) has been the single most successful domestic company in China, and Cramer wants to hear from Yum about how the Chinese consumer is being affected by the slowing economy.
Costco (COST) is taking share from supermarkets, but the stock has moved up, and Cramer admits he is nervous when Costco's stock does this, because it usually gets hit afterward. He is also concerned about the possible retirement of the CEO Jim Sinegal, whose leadership has turned the company around.
Monsanto (MON) is suffering because of news of a bumper crop, which may be good for consumers and food companies, but is not good news for seed and fertilizer stocks. Cramer would like to think the company could transcend this issue with its growing biotech segment, but all agriculture stocks are likely to get punished with the same blow.
Marriott (MAR) has outperformed in tough times, but for this earnings report, there are more questions than answers. Will the economy plague the company? Will Marriott continue to create value?
The Non-Farm Payroll Number may not be so terrible, but won't be so good, either. Cramer expects lukewarm results.
Cramer took a call:
Teco Energy (TE) is a high-yielding utility that is the kind of stock investors should be buying in the current environment.
China Is Getting Worse: Arch Coal (NYSE:ACI), Joy Global (JOYG), Alcoa (NYSE:AA), Wynn Resorts (NASDAQ:WYNN), Coach (NYSE:COH), Tiffany (NYSE:TIF), Sina (NASDAQ:SINA). Other stocks mentioned: Itau Unibanco Holdings (NYSE:ITUB), Telecom New Zealand (NZT)
"I'm tired of hearing how healthy China is," said Cramer. "China isn't getting better. It's getting worse."
While there used to be hype about the Chinese build-out, copper is plummeting, and may drop from $3 to $2. Arch Coal (ACI) made a dramatic pre-announcement to the downside. While Joy Global (JOYG), producer of mining machinery, said business in China is strong, the decline of the coal stocks does not lie. "Aluminum is frightening," said Cramer, who has gotten behind Alcoa (AA) because it is undervalued, but for now, the stock is not moving. Wynn Resorts (WYNN), which is levered heavily to China, has seen a dramatic drop-off, as well as retailers like Tiffany (TIF) and Coach (COH) which have significant exposure to China.
What is happening to China? Demand for its goods is falling off as its labor prices are rising higher. The economy is riddled with inflation, and what is really going on with their banks is a mystery. "The weakness in China is not going away, it is accelerating."
Cramer took some calls:
Sina (SINA) is not on Cramer's buy list, not least because it has accounting issues.
Itau Unibanco Holding S.A. (ITUB): "No banks should be owned," even Brazilian banks.
Telecom New Zealand (NZT) has a very high yield, and Cramer wants to do some homework to see if it is sustainable before he can recommend it.
Freeport McMoRan (NYSE:FCX), Netflix (NASDAQ:NFLX), Chipotle Mexican Grill (NYSE:CMG), Priceline (NASDAQ:PCLN), Salesforce.com (NYSE:CRM), Amazon (NASDAQ:AMZN), Deckers (NYSE:DECK), Kinder Morgan Partners (NYSE:KMP), Deere (NYSE:DE), General Mills (NYSE:GIS), Kimberly Clark (NYSE:KMB), Duke Energy (NYSE:DUK), Consolidated Edison (NYSE:ED), Walgreen (NYSE:WAG), Express Scripts (NASDAQ:ESRX), Apple (NASDAQ:AAPL)
Machines are in charge of trading, and the exaggerated impact of double and triple ETFs, especially on the short side, are making day-to-day buying and selling of stocks treacherous. Few things work in this environment, but Cramer would look for high-yielding MLPs like Kinder Morgan Partners (KMP), REITs and stocks with solid dividends like Kimberly Clark (KMB), which was unfairly downgraded, and utilities like Duke Energy (DUK), Con Edison (ED) and Teco Energy.
Valuation, in normal times, is a gauge for buying stocks, but not in the current environment. Freeport McMoRan (FCX) is going to keep on dropping along with copper prices, even as the company has a strong balance sheet. While momentum growth stocks were the name of the game, Netflix (NFLX) has been shot out of the sky and keeps falling further. Cramer would take gains in former Mad Money favorites like Chipotle Mexican Grill (CMG), Priceline (PCLN), Salesforce.com (CRM), Amazon (AMZN) and Deckers (DECK). Even Apple (AAPL) seems a bit vulnerable, even ahead of its new product launch.
While another Lehman is not likely to happen in Europe, there will be plenty of pain ahead, not least because Europe is exporting its inflation; Americans pay high Brent European prices at the pump while domestic oil companies suffer from the low price of West Texas Intermediate. If the U.S is not getting hit with bad news about Europe's banks, it is paying Europe's oil prices. Meanwhile, all investors can do is go for yield, REITs and utilities while "taking a daily European beating."
Cramer took some calls:
Mad Mail: Illumina (NASDAQ:ILMN), Opko Health (NYSE:OPK), BRF-Brasil Foods S.A. (NYSE:BRFS), Harry Winston (HWD), Weatherford International (NYSE:WFT), Ensco (NYSE:ESV), Bristol-Myers Squibb (NYSE:BMY), Red Hat (NYSE:RHT)
Illumina (ILMN) there are worries that this gene sequencing equipment maker may be a casualty of government cuts. While the stock is cheap, it is in danger of going lower.
Opko Health (OPK) has made positive changes in expanding beyond eyecare into general health. This stock could work as a trade, not an investment, off of a paper the company will publish on cancer diagnostic products, but Cramer warned it is not for the risk-averse.
BRF-Brasil Foods (BRFS) has a great long-term story as one of Brazil's largest food companies, but Cramer doesn't see enough of a catalyst to drive it upward.
Harry Winston (HWD) is a high-end diamond stock that has been annihilated, dropping from $28 in mid-July to $10. However, with an increasingly cautious consumer, Cramer doesn't see any reason why it can't go lower.
Red Hat (RHT) might be a buy at a lower level now that there is chatter that Salesforce.com, which is the leading cloud play, might take a hit.
Cramer told a viewer he would be a buyer of Bristol-Myers Squibb (BMY).
A viewer asked if emerging market ETFs were buys. Cramer would stay away from them until China has bottomed.
Jim Cramer was up 31% in 2009. Click here now to sign up for Jim's Action Alerts PLUS and trade alongside him. Special discount for Seeking Alpha users.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.