Rotation Into Commodities - Cramer's Mad Money (2/4/16)

Includes: AA, CLX, FCX, PANW, WFC, YUM
by: SA Editor Mohit Manghnani


Wells Fargo CEO interview.

Yum! Brands' secret Taco Bell menu item.

Palo Alto is the dominant player in cyber-security.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money Program, Thursday, February 4.

Fund managers have finally realized that the dollar has peaked which made them run for commodities on Thursday. That is why Alcoa's (NYSE:AA) stock ran up 10% and Freeport-McMoRan (NYSE:FCX) ran 17%. Alcoa as a company has been pulled down and investors began to hate anything related to commodities.

Alcoa splitting itself into 2 companies is creating value. The fund managers were negative on cyclicals which made them pile into the industrial and commodity stocks. Why did such a move happen? "It makes sense because these commodities are priced in dollars, and I have plenty of charts and graphs that show this relationship is both real and investible," said Cramer.

Cramer cautioned investors that such rotational moves are for the pros and not the weak-hearted.

CEO interview - Wells Fargo (NYSE:WFC)

The financials have been crushed lately. In the San Francisco week, Cramer interviewed Chairman and CEO John Stumpf of Wells Fargo to hear his take on the Fed, interest rates and the economy.

Stumpf mentioned that Wall Street may be focused on interest rates, he runs the bank to function in any interest rate environment. Their objective is to do more business with more customers.

Stumpf also agreed that the oil and gas sector is under a lot of stress. However, it accounts for less than 2% of Wells Fargo's portfolio. Moreover, the benefits of lower oil prices will more than offset the losses caused by the sector. He thinks autos, housing and construction will pick up.

Wells Fargo's objective is to return cash to shareholders via stock buybacks and dividends.

CEO interview - Clorox (NYSE:CLX)

Clorox reported great earnings, raised guidance but their stock still went down. What happened there? Was it because of the rotation in commodities? This could be a great entry point. To find out, Cramer interviewed CEO Benno Dorer.

"I focus on the long-term fundamentals. Our shareholder return has been very solid over the last 12 months, our stock grows more than 20%, and fundamentally, what I care about is, are we delivering against the business," said Dorer. He feels good with the rise in sales and profits.

After Dorer took over in 2014, there have been many product innovations. "Look we have a lot of innovation out there right now whereas others don't, and it's really across the portfolio," said Dorer. The company is not all about innovation, but marketing also. They have been spending 40% of the marketing budget online and seeing instant results.

Dorer was optimistic about the company's growth.

CEO interview - YUM! Brands (NYSE:YUM)

Yum Brands recently announced the spinoff of its Chinese business, which is getting some life back after reporting mixed results, but with positive same-store sales growth in China, and that also happens to be the company's biggest market. Cramer interviewed CEO Greg Creed to find out what's in store for the company.

"I think what we have created is two powerful, independent, focused growth companies. On the one hand, Yum Brands will be a global franchisor of three iconic brands. And then, with Yum China, we will obviously have access to the fastest growing economy in the world," said Creed.

There are great investment opportunities for Yum China and Yum Brands. Yum Brands is also targeting 15% return for shareholders. Creed feels positive about KFC in China and is back on track, but they have work to do on Pizza Hut.

Commenting on Taco Bell in the US, "We don't do any marketing at Taco Bell, what we do is storytelling. We're like publishers," he said. Yum Brands have announced a secret menu item from Taco Bell to be revealed during the Super Bowl. He gave a hint about the secret menu item by showing the round shape. "10,000 people have pre-ordered a product that they don't even know what it is," added Creed.

The company is on track to return $6.2B to shareholders in the form of stock buybacks.

CEO interview - Palo Alto Networks (NYSE:PANW)

The market has been cruel to high-growth cyber-security stocks. Palo Alto Networks, which was considered the best of breed, wasn't spared either. Cramer mentioned that this company has the best growth and investors should think long term. He interviewed CEO Mark McLaughlin, as well as Brent Jones, managing director at Northgate, which was one of the first investors in the company.

Jones mentioned that Palo Alto's brand is becoming more significant with time. When the bad guys find that hacking a system takes time, they move on. That is what Palo Alto is doing by making it harder for bad guys to hack.

When it comes to the future, no one knows what the hackers will come up with. However, Palo Alto is the one to find out as quickly as possible. The company's platform is making it tough for bad guys which makes Palo Alto a dominant player in cyber-security.


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