Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Monday, January 11.
What would it take for the markets to go from capital preservation mode to capital appreciation mode? Cramer gave a checklist of 14 events that will make this happen.
- The Fed needs to understand that talking about 4 rate hikes in 2016 adds uncertainty. They should move into data-dependent mode.
- Political uncertainty has to go away. Both the Democratic and Republican parties are making Wall Street uglier by not being pro-capital appreciation.
- China has to pull up its socks and clean up its act. World needs more transparency from China.
- Commodities have to find a bottom. If this doesn't happen, deflation will derail most economies.
- Oil has to stop going down or else big players like Petrobras (NYSE:PBR) (NYSE:PBR.A), Chesapeake (NYSE:CHK) and Freeport-McMoRan (NYSE:FCX) will run out of capital due to large debt they owe. Cramer doesn't think oil will go down unless there is geopolitical crisis in the Middle East.
- The world has to stabilize. Saudi cutting ties with Iran, Brazil not being able meet its debt, immigration crises in Europe are some of the issues causing instability in the world.
- The brain-dead companies like Petrobras and Vale (NYSE:VALE) need to reorganize themselves as the high-yield market has become a chaotic place.
- The US dollar must stop going higher. Unless that happens, US companies with international businesses will have a problem.
- Healthy M&A deals need to increase where the stock of the acquirer goes higher.
- The strong IPO market needs to come back. More private equity deals should hit the market.
- The industries that have peaked, such as autos, housing and cellphones need to reorganize themselves.
- The leadership needs to broaden and more sectors need to start rallying.
- The market needs to come up with a list of new favorite stocks. FANG stocks and Tesla (NASDAQ:TSLA) have been hurt a lot.
- The sentiment should become more negative and the bears have to outnumber the bulls. Once that happens, the market will find a bottom.
"Many of these issues on the checklist must be resolved before we can be more concerned with making money than not losing money," concluded Cramer.
What happened to Under Armour (NYSE:UA)?
One of the most loved stocks, Under Armour, received a downgrade by Morgan Stanley (NYSE:MS) to underweight. They reported a threat of declining market share and falling average selling prices. Analysts are also worried about Under Armour's near-term earnings uncertainty due to price cuts of winter apparel. Footwear is also down 20% since 2013 and Under Armour has to compete in price now.
"My take? You can't beat Nike (NYSE:NKE) at their own game," said Cramer. The analysts say that the earnings and growth estimates are higher by 1-3% and North American sales could slow down to 16%. This led to the stock falling by 7%. Even after the decline, the stock is trading at 55 times 2016 earnings while the average stock sells at 17 times earnings.
This happens with all high-growth stocks. Once the momentum starts going down, people have no idea how to value a stock with falling growth rates. If Under Armour reports good results later this month, the downward trajectory for the stock will end.
CEO interview - Alcoa (NYSE:AA)
Alcoa reported an upside surprise on Monday but the market did not enjoy the news as it has branded Alcoa as a commodity producer. With Alcoa splitting into 2, a commodity producer and an aluminum technology company making parts for aerospace, transportation and construction, things look good. Cramer interviewed CEO Klaus Kleinfeld to find out what lies ahead.
Kleinfeld said that there has been volatility in the aluminum market, but Alcoa is well positioned in all high growth markets. "We have worked very hard on the value add side to be positioned in those markets that have growth. And on top of it, we actually have accelerated growth on those end markets because we are aluminizing these places," he added.
He is of the opinion that production cuts in aluminum around the world have started taking place and this will lead to a deficit which will stabilize the prices. The global demand is expected to increase by 6% which puts Alcoa in a good position. On the technology side of the business, they are innovating in jet engines and titanium products. Alcoa has also been making smart acquisitions. Cramer thinks Alcoa remains a buy.
Viewer calls taken by Cramer
Royal Dutch Shell (NYSE:RDS.A): The long-term fossil fuel situation does not look good.
New York Community Bancorp (NYSE:NYCB): The stock is fine as the Fed looks to raise rates in the long term.
Stanley Black & Decker (NYSE:SWK): The business is strong and it's an inexpensive stock. Cramer's trust has been buying the stock on its way down. It's more valuable than it's selling for.
Skechers (NYSE:SKX): Skechers is one of the best companies, but the market is bad for stocks.
Target (NYSE:TGT): The online business was not great but that could change. As it gets colder, it will be better for Target.
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