Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, December 6.
Markets continue to inch higher as investors gauge the positives of a Trump presidency.
But what could surface as trouble for Wall Street as we move closer to Donald Trump taking charge in January?
Mad Money's Jim Cramer detailed the "cracks" that may appear in the Trump rally. Sectors that were once thought to be beneficiaries of the new administration may instead see challenges.
Cramer's main idea: Investors liked the prospects of defense when Trump was declared winner. But he said the defense investment case has become more complicated.
First, there was Trump targeting United Technologies (NYSE:UTX) and its move to take Carrier jobs to Mexico. The company has a large part of its operations with the federal government and defense, a business it wants to protect. So the company made an effort to address Trump's concerns with the jobs move.
And then on Tuesday, Trump took aim at Boeing (NYSE:BA), criticizing the cost of a new Air Force One plane (tagged at $4 billion). It was unclear if Trump was criticizing the plane-making giant after its top executive voiced concerns about targeting trade with China. Cramer pointed out Boeing has $18 billion in contracts with the government and defense, representing about 20% of its business.
Cramer suggested defense contractors "got the message" regarding Trump's possible moves with defense contracts, and that the recent talk "is a risk factor."
"Remember, Trump was elected to drain the swamp in Washington," Cramer said. "And the military industrial complex is as swampy as it gets."
What does work as we move closer to Trump becoming president? Cramer said he still likes energy. And maybe investors should consider investments not tied to government contracts. He suggested Netflix (NASDAQ:NFLX) as a candidate.
TherapeuticsMD On The Rise
Cramer hosted TherapeuticsMD (NYSEMKT:TXMD) CEO Robert Finizio on the show. The stock is down significantly for the year. But shares rose 10% Tuesday on good news for its treatment for menopause.
Finizio said the recent results show the treatment is safe and effective. The next step is to file a New Drug Application (NDA) with the FDA, which could happen as early as third quarter 2017.
Finizio said the Drug Quality and Security Act will help the company get its product to users given that the law removes unapproved drugs from the market.
Looking At the Charts
Cramer took time to look at the charts of key items he called the three pillars of today's economy - interest rates, the dollar and inflation. His look came from Bob Moreno, publisher of RightViewTrading.com.
First, the Mad Money host viewed interest rates. Cramer said the charts suggest bond prices are headed lower, which means interest rates are headed higher. Key gauges for following this development include the 20-year Treasury yield and the TBT leveraged ETF.
As for the "freaking strong dollar," Cramer said with the Fed poised to raise interest rates this month, the dollar is set to continue higher. The charts suggest that as well, he said.
And the charts suggested inflation is headed higher, thanks to a boost for commodities.
With the charts suggesting higher interest rates, a stronger dollar and inflation on the rise, that all may signal "real economic growth," Cramer said.
Pioneer Well Positioned
Cramer hosted Scott Sheffield, CEO of Pioneer Natural Resources (NYSE:PXD). Sheffield said oil is poised for growth given the OPEC deal and the expected bump energy will receive under a Trump administration. Sheffield said the company can benefit from those items given its continuing efforts in key areas such as the Permian Basin in Texas.
Sheffield also emphasized Pioneer's balance sheet, which not only managed to stay strong during a downturn in the energy markets, it's also allowed the company to remain essentially debt free.
Pioneer increased its horizontal rig count from 12 rigs to 17 rigs in the Northern Spraberry/Wolfcamp area of the Permian in the second half of 2016. Sheffield said the company will activate another 10-12 wells next year.
What's Next For Energy?
Cramer also spent time with Rusty Braziel, president and principal energy markets consultant for RBN Energy. Braziel, known for calling the last bottom for oil, said the recent OPEC deal may allow U.S. energy firms to start "pumping like mad." But he also offered some caveats.
Given Trump wants a renaissance in energy, the "oil industry will get things done," Braziel said. But he also reminded viewers oil and gas firms "got a lot of things done - so many things done" with Obama in office that energy was crushed when oil prices fell.
He said the recent OPEC production cut is all about "optics." Saudi Arabia wanted the deal. Russia, a non-OPEC member, is participating, but "is on the honor system," Braziel said. And key OPEC members Iran and Iraq will "optimize the situation as best they can," he said.
Calls Taken By Cramer
Arconic (NYSE:ARNC): Despite recent sell ratings "this is one of the cheapest stocks out there," Cramer said.
CVS (NYSE:CVS): This stock "represents great value."
Coca-Cola Enterprises (CCE): Cramer said the stock is not a good bet due to the strong dollar and overseas impact.
GoPro (NASDAQ:GPRO): Avoid the stock.
Nike (NYSE:NKE): "I like Nike longer term," Cramer said. But he likes Foot Locker (NYSE:FL) given that the retailer can benefit from a competitive environment between Nike, Under Armour (NYSE:UA) and Adidas (OTCQX:ADDYY).
Visa (NYSE:V): "Very undervalued."
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