Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Thursday, January 21.
It's time to get into the head of Wall Street.
In his Thursday show, Mad Money's Jim Cramer attempted to peek into the mind of the market, gauging why stocks - after a tumultuous start of the year - rallied. Oil closed up 4% at more than $29 a barrel. That sent stocks higher. The S&P 500 climbed 9.66 points, or about 0.5%. The Dow was up 0.74%, gaining 115.94 points.
What may have confounded market observers were higher moves by stocks that could be impacted if oil goes higher, especially in the travel and leisure sectors.
Airlines saw a rally. Delta Air Lines (NYSE:DAL) was up nearly 2% in Thursday's trading. Spirit Airlines (NASDAQ:SAVE) ended nearly 5% higher at the close. Priceline (NASDAQ:PCLN) was up almost 1 percent while Marriott (NYSE:MAR) climbed 3%. Cruise ship stocks also rallied, along with other consumer-spending stocks in retail and restaurants.
For travel stocks, "Every tick down in crude provides a boost for the bottom lines of these companies," Cramer said.
Still, does it make sense these stocks soar after oil's biggest rally so far this year?
In his cranial-focused evaluation, Cramer said big portfolio managers, in their overall assessment of the market, have "collectively decided as oil goes lower, so goes the economy."
The thinking is that all stocks are impacted (less consumer spending, lower earnings for companies) if the economy falls into a recession. "If oil goes south and goes south fast that means we're going into a recession," Cramer said.
Some market observers won't accept the premise that "oil is going down because there is too much supply - they think oil is going down because of a lack of demand," he added.
Oil's rally Thursday may have taken that recession scare off the table, at least temporarily, Cramer said.
Stop Being So Negative
It doesn't pay to be too pessimistic about the market or certain stocks.
A case cited by Cramer is the recent action surrounding Burlington Stores (NYSE:BURL). The market had a dour view of the retailer until the company released early fourth quarter numbers that - for those closely watching the stock - weren't all that bad. Last week Burlington said sales are expected to increase 3.7% in Q4, the low end of the guidance range of 3.7% to 4.7%. The company also narrowed EPS guidance of $1.44 to $1.46.
Burlington won an upgrade from Goldman Sachs Thursday. The stock closed up more than 2% in trading.
Investors were expecting the worst for Burlington, given the warmer weather that impacted retail sales nationwide during the critical fourth quarter. While the company struggled like other retailers during the key three-month period, the fact that the numbers weren't terrible was a surprise for many.
"This is what happens when Wall Street gets too gloomy," Cramer said. "You don't need much good news to send a stock higher."
Cramer called Burlington a well-run company, spending money to upgrade inventory systems and improving the appearance of its stores. The company also is paying down debt.
Burlington weathered this storm. And Cramer reminded viewers a big one is coming (which could help the company deliver another surprise).
You Can Predict Oil's Next Moves? Yeah, Right
Have we seen a bottom in oil?
Cramer admitted it's hard to predict the next moves for the volatile commodity. And he suggested anyone who thinks they can forecast what happens next for crude doesn't know what they are talking about.
He cited oil's collapse in the mid-1980s.
On Jan. 6, 1986, oil was selling for $26.53 a barrel (ironically, that's close to the same price for crude today - 30 years later). In less than three months, the price tumbled to $10.25.
Fast-forward to today.
Some suggest oil's decline is due to a strong dollar. Cramer cited the collapse of the dollar in the mid-1980s to dispel that idea.
Others will state that producers can simply turn off the tap. The price will spike when that happens. Cramer said that's unlikely to happen since producers need to pay off debt financing their operations - they need to keep the tap open so they can pay the bills.
Others predict Saudi Arabia's attempt to cut prices and ramp up production is suicide. Yet, Cramer observed, "they done it before, why wouldn't we think they would do that again?"
He added, "as long as we keep pumping they will keep pumping - to drive our companies out of business."
The other issue is that U.S. production is barely slowing down. In fact, U.S. oil production increased slightly to 9.3 million barrels a day this week, and a lot of new production is coming online in the Gulf of Mexico.
Bottom line, "nobody seems to know anything" about the direction of oil, Cramer said.
Buybacks on the (First) Horizon
Cramer spent some time with Bryan Jordan, CEO of First Horizon National Corporation (NYSE:FHC). The company beat some key metrics in its last quarterly report, but Wall Street isn't paying attention. Jordan said he cannot understand why investors are not looking closely at the company.
FHC shares are trading near their 52-week low. Because of that, Jordan said the bank is buying back shares. He cited the company's strong loan growth and strong customer relationships as strong attributes. First Horizon also has minimal exposure to energy - less than 1 percent of the bank's portfolio.
"Our stock is on sale. We will buy back some of it," the CEO said.
Jordan said he thinks the economy in general is pretty strong, and real estate appears to be in good health. And when oil bottoms out, "we will be there to pick up those relationships," he said.
BioX in the Spotlight
Cramer focuses on publicly-traded companies. To end his show, he put the spotlight on a private entity.
BioX Medical Technologies has developed a bionic ankle device for those missing that part of the leg. While typical prosthetic limbs are passive in nature, forcing the amputee to use the entire body to move, the company's technology serves as a "wearable robot," or "smart machine" that allows active movement, said Dr. Charles Carignan, BioX CEO.
The market could be lucrative for the company. There are 2.5 million amputees in the U.S. About 175,000 prosthetic legs are made every year. And the prosthetic market is valued at $500 million. BioX has 1,200 patients with the product, and the Veterans Administration has been supportive of technology, Carignan said.
"Whoever built the Six Million-Dollar Man has nothing on these guys," Cramer said.
Viewer Calls Taken By Cramer:
S&P 500 (NYSEARCA:SPY) - The S&P 500 has tested a key level this week. Could this be a short-term bottom?
Yahoo (NASDAQ:YHOO): Yahoo has value in its Alibaba (NYSE:BABA) stake, but not much else.
Taser (NASDAQ:TASR): The stock could be a bargain at $15. "Taser represents value," Cramer said.
Marathon Oil (NYSE:MRO): Cramer is not a fan given the deep dividend cut.
JetBlue (NASDAQ:JBLU) and American Airlines (NASDAQ:AAL): American "is a good stock. It's so cheap. The whole group is cheap... but everyone is so gloomy. It's nuts."
Exxon Mobil (NYSE:XOM): Cramer reiterated his stand that he's "not a fossil fuels guy." However, "I'm never going to tell anyone not to buy Exxon," adding it's a conservative company. "Nobody got hurt (buying Exxon Mobil)."
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