Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, April 27.
Is the market playing a cruel joke, or are these the signals of a changing macro trend? Cramer was shocked to see the reactions of the market on Monday. It was nothing like the past. Till Monday, stocks with good earnings and higher guidance rallied, and those with poor earnings and guidance cuts were hammered. However, the pulse was different on Monday. The trajectory of stocks was not determined by earnings, but macro views of the market which overrode everything.
How did Cramer spot these macro view changes? "Look at the best of the best among companies that reported good numbers, and the worst of the worst among companies that reported bad numbers. Then you extrapolate to make broader judgments," said Cramer. For instance, UnitedHealth (NYSE:UNH) group reported good quarterly earnings and guided higher too, but it still went down on Monday. What happened there?
On the other hand, Freeport McMoRan (NYSE:FCX), the mineral and mining play reported a poor quarter where it lost $2.5B, admitted that its copper business is disappointing, has $20B debt on its balance sheet, and it had an 84% dividend cut last month. After all this, the stock went higher. Has the market gone crazy? Cramer said that, "This frontsy-backsy action is a flashing neon sign that many investors are betting on a sea-change." It is a bet that commodity inflation will get stronger, and interest rates will go down. Since Freeport is a pure commodity play, it would rally only if investors thought inflation was coming back, and this makes the investors buy gold and even copper is rebounding. This is the reason that oil made a U-turn and is heading higher.
All these factors translate to a weaker dollar. When the value of the dollar goes down, it takes more to buy commodities. That is why the reaction to Freeport was positive. In contrast, the reaction to the domestic play UnitedHealth, which is not affected by currency, was negative. UnitedHealth is a play on earnings growth. If inflation is back, then investors will not pay as much for future earnings. That is why portfolio managers will rotate out of it.
Same could be seen in Helmerich & Payne (NYSE:HP) which is sensitive to the price of oil. It had rallied after the analyst upgrade. However, Celgene (NASDAQ:CELG), which had a good acquisition, was hammered.
The dollar refuses to go higher and the economic data shows the strength in the economy may not be sustainable. "Bottom-line, if you are worried about short-term movements, be aware that this vicious squall may not be finished and the damage in its wake could override terrific earnings for days and days before the tempest has passed."
Off the tape
From time to time, Cramer goes off the tape to review privately held companies that are making an impact and can go public someday. He reviewed Theranos, a revolutionary diagnostics company that empowers individuals to take better control of their bodies, while changing the inefficient ways of an older medical system. "This is a revolutionary company that threatens to change healthcare the same way that Amazon (NASDAQ:AMZN) changed retail or Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) changed computing, or Apple (NASDAQ:AAPL) changed the cellphone," said Cramer.
Elizabeth Holmes founded Theranos after dropping out of Stanford University. She raised $400M in 2014, and the company is valued at $9B, which makes Holmes the youngest self-made female billionaire. Theranos allows taking blood samples in a way that is faster and cheaper. Walgreen's Boots Alliance (NASDAQ:WBA) enlisted Theranos Labs to be available in 41 wellness centers across the state of Arizona. Cramer interviewed Holmes to know more about the company.
"The goal is to empower the individual. We believe strongly that the future of healthcare is in enabling the individual to have the information that they need to take ownership of their health," said Holmes. She showed a small tube that can be used to take blood samples instead of big vials. Currently 80% of clinical decisions are made based on lab results from blood testing.
She adds that Theranos will encourage people to get more testing as previously the thought of a needle drawing blood from the arm could be daunting to some. "Absolutely, myself included, I am absolutely terrified of it. I've always said that if you were to think of torture experiments, it would be a phenomenal one because you sit there and watch as your blood is sucked out of you."
This could also be useful for cancer patients and autistic children. Commenting on the competition from big companies that can stop the growth of Theranos, Holmes said, "We have a belief system, that this is not about us or our technology. It's about giving people a basic right that they have lost. This is the ability to get access to their health information. Our belief is that the cost of testing should be lower across the board."
Cramer said she could be compared to Steve Jobs due to the innovation she brings to healthcare. She replied saying, "I don't think there is another Steve Jobs. He was a phenomenal entrepreneur, and we've got an incredible opportunity to try to uphold a legacy in Silicon Valley of change in the world. We are working 24/7 to do it."
CEO interview - Intel
Intel is the world's largest semiconductor company. In the times of internet of things and cloud computing, Intel's major revenue still comes from PC, the future of which looks weak. The company's recent quarter was not as bad as people were expecting. Cramer thinks the stock is still cheap and the company is changing faster than many think. He interviewed CEO Brian Krzanich to discuss the future of Intel.
Krzanich said that the company is innovating and adapting the internet of things much faster than many think. In the last quarter, 40% revenue and 60% margins came from the data center and the IP business which revolves around the internet of things. He also said that Intel is innovating constantly and spoke about the real sense technology which is revolutionizing the way devices are used. The real sense camera installed in drones can make the devices see and think. "What we have done now is taken the intellectual property we built on the PC and we are pushing that across a variety of devices," said Krzanich.
Cramer posed a question on the rumor about the Altera (NASDAQ:ALTR) acquisition. "I can't comment on rumors that are in the press. But in general the way we think about it is, you want to have a nice supply line of your internal technology that you're developing. That is always first, you always find that first and you drive that first. There are cases where we want to go outside and do acquisitions for intellectual property or to get market share, and we are not afraid to go do that at times," said Krzanich.
He also added that the product cycle that takes 3-4 years is gone. He now expects products to release within a year. "That is one of my big goals, is to show people that we are an innovation engine and that innovation will drive growth. We have had to turn it back on and really get it moving faster."
Cramer said Intel should be looked at like a long-term movie, not a snapshot.
CEO interview - Restoration Hardware (NYSE:RH)
Restoration Hardware has had a bit of a pullback. Cramer thinks it is a great opportunity to buy the stock on weakness. He interviewed the luxury home furnishing company's CEO Gary Friedman.
Cramer posed a question on the big art gallery and stores. Friedman replied saying, "We are in a day and age where the world is moving faster and change has to be embraced. The idea of creating a center that really supports the process from idea to presentation allows us to move significantly faster."
He discussed their social media strategy and said that the good things a company does should reach the people. Most of the time, Restoration Hardware is being attacked. But the people who believe in the company will respond to the innovation positively.
He clarified that the company wants to build a shareholder base for the long term and they want a build a durable business for years. That is why he said on the conference call that they do not want traders. He added that the company has never missed guidance on the bottom-line.
Viewer calls taken by Cramer
Applied Materials (NASDAQ:AMAT): "You want to hold on to it here, because it has a solar division that is terrific."
Sony (NYSE:SNE): "This stock is totally hostage to the dollar and the yen. As long as they keep devaluing the yen, Sony goes higher. It is a decent stock to own."
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.