Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Friday, March 18.
For 2016, the averages are in the black again. Investors have questions about this rally being real or a trap. In Cramer's opinion, "if you are long the right stocks, this rally is very much for real. If you're in the wrong stocks or shorting the winners, then it poses real risks." For the people in the wrong stocks, they should stop questioning and wait for the pullback.
There is significant rotation out of healthcare, banks and politically charged stocks and into cyclicals and industrials. With that Cramer discussed his game plan for the week.
Existing home sales number will be out on Monday. If it is strong, Cramer would recommend investors to buy home-related stocks. Mattress Firm (NASDAQ:MFRM) will report earnings on Monday. The company has a huge debt pile that has stretched its balance sheet. Cramer is not comfortable with that kind of debt.
Nike (NYSE:NKE) reports Tuesday. Cramer will be watching it closely and he likes the stock. Red Hat (NYSE:RHT) reports earnings too and Cramer is bullish on the stock after seeing good earnings from related cloud-based companies.
Five Below (NASDAQ:FIVE) might have got its groove back. Cramer thinks it can join the winners circle.
General Mills (NYSE:GIS) reports on Wednesday. No one got hurt owning this stock and Cramer thinks that the company's attempt to go natural and organic will help propel the stock gradually. If the stock goes down, buy it for the long term.
KB Home (NYSE:KBH) will report earnings on Wednesday. If the company reports good numbers, then the entire housing cohort will see pin action. Cramer suggested watching KB Home's earnings and then buy Lennar (NYSE:LEN.B) (NYSE:LEN).
PVH Corp (NYSE:PVH) will also report after the close. Apparel was not doing well till some time back, but Cramer thinks the stock has bottomed.
Accenture (NYSE:ACN) is one of Cramer's favorite stocks and it will report earnings on Thursday. Cramer remains bullish on the stock.
Finish Line (NASDAQ:FINL) will report earnings too but they have not been consistent. Cramer will wait and watch if the company can report a good quarter.
The risky retailer with lots of debt - Signet Jewelers (NYSE:SIG) - will report earnings on Thursday. Stay away.
Personal consumption data is an important number that will provide insights on consumer spending after the poor retail sales number last week.
"All of those predictions for a horrendous 2016 based on a poor January are now blown out of the water. Now, it is time to return to examining the fundamentals of individual companies, not the taxonomy of the Federal Reserve," said Cramer.
CST Brands (NYSE:CST)
Cramer went back to talking about spinoffs and their power to unlock value. There were 38 spinoffs in 2015 and there are many in the pipeline for this year. "I am a huge backer of this break-up strategy, in part because the stock market prefers smaller, easy-to-understand, pure-play type companies over big, complicated conglomerates," he said.
Cramer looked at CST Brands (CST), which was a spinoff of Valero Energy (NYSE:VLO) in 2013. The breakup of the company was to make Valero focus on the refinery business and CST on the retail side. Valero has gained as the oil prices have fallen since their input cost has reduced.
CST Brands is a gas station and convenience store play in North America. It is the second biggest independent gas station with 1,032 locations in the U.S. and Canada. 60% of the locations are owned by CST which makes it a real estate play as well. The company's stock has done well after the spinoff, since the company was making small acquisitions to increase its footprint.
After the oil prices started falling, CST's stock was hit since the company gets more than half of their business from Texas. In May 2015, the company missed top- and bottom-line estimates after which its stock got pounded. The market selloff in 2016 added to investors' misery. The company has grown to 1,880 locations and management has announced initiatives to monetize its real estate to build more stores.
The stock has attracted activist investor interest and the company's management announced that it is considering strategic alternatives to enhance shareholder value. The stock trades at 17 times earnings which cannot be called cheap.
Cramer thinks that monetization of real estate and strategic alternatives will get growth in the company and it's not worth waiting for a pullback. He blessed owning the stock for speculation.
Do your homework
"You should know the stocks you own," said Cramer. Do the homework on the company you buy so that when an opportunity to buy on the market selloff comes, you can grab it. That was the lesson learned yet again from the cloud business selloff fiasco recently.
Cramer interviewed the CEOs of Adobe (NASDAQ:ADBE), Workday (NYSE:WDAY) and Salesforce (NYSE:CRM) in February. "If you listened to those interviews, even though the companies weren't able to reveal their actual numbers, you heard stories of accelerating revenues, rapid adoption of product, robust total addressable markets and war stories of conquest," said Cramer.
Adobe's CEO was bullish on cloud-based subscription revenue and rapid acceleration. Salesforce and Workday spoke about blue chip client wins. When Tableau (NYSE:DATA) and LinkedIn (NYSE:LNKD) reported poor quarters, it took down the stocks of all these 3 companies as they belonged to the cloud too.
When these 3 companies reported their last quarter, their stocks shot up. The cloud business fiasco was a rare opportunity for investors to buy these 3 companies at lower prices. "If you knew what you owned with these 3 companies, you would have understood that the similarities between Tableau Software and LinkedIn and those three companies were nil," said Cramer. This would have been possible if investors would have done their homework.
Adobe is at an all-time high. Did you do your homework and take advantage of the opportunity?
Cramer reviewed yet another spin off. Chemours was spun off by Dupont last July as a combination of commodities and chemicals business. This was a lower margin business and hence spun off from the high margin business of DuPont, so they can focus high-margin proprietary interests that are non-cyclical.
The timing of Chemours' spinoff was bad as commodities were in freefall. The stock of the company has done poorly as it fell from a debut price of $16.51 to a low of $3.06 in January 2016. With such a low price, the stock got an upgrade by Goldman Sachs (NYSE:GS) as it was too cheap to ignore.
Since the expectations from the company were low, it could beat estimates when it reported in February. The stock has rallied 144% from its low. At 6 times earnings and commodities finding a bottom, this stock is too cheap to ignore indeed.
This is a speculative stock that is worth it. "If you want to make a bet that the global economy is going to get stronger and the dollar will continue to get weaker, then Chemours might be worth speculating on, given that the stock is so darned cheap," said Cramer.
Viewer calls taken by Cramer
Nordic American Tanker (NYSE:NAT): The yield looks safe.
Xilinx (NASDAQ:XLNX): The stock trades at 23 times earnings. Cramer likes it and still remains a buyer in the current environment.
PayPal (NASDAQ:PYPL): The stock was downgraded but Cramer thinks the stock is poised to go higher.
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