Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday, January 4.
Sometimes all that is needed for a market to rally is for fears to be proven false. In this market, collision avoidance is king and when that happens, stocks get legs to go higher. There were fears that the market would crash after Dow hitting 20,000 but that did not happen. There were fears that portfolio rebalancing and tax-loss selling would hit the market but that did not happen either.
Be it pundits calling the peak in auto, home and planes, or Trump tweeting about individual stocks, it did not happen either. All these led to buying opportunities in reality.
Deregulation is a part of Trump's agenda but the skeptics are asking how it is possible. Cramer added that Trump plans to deregulate through executive appointments. Oklahoma Attorney General Greg Pruitt was nominated by Trump to run the Environmental Protection Agency. If that happens, he could roll back years of regulations.
In Cramer's opinion Pruitt will be good for the earnings of companies related to fossil fuels, utilities, refiners and pipeline operators and not the environment. Andy Puzder, who is the franchiser of fast food companies Hardee's and Carl's Jr. was nominated as secretary of labor. He has been a critic of raising the minimum wage.
Trump also nominated corporate finance lawyer Jay Clayton to head the SEC and Cramer doesn't expect more regulations from him. "Clayton's a dealmaker, he said, and will look for ways to help business, not hurt it," said Cramer.
"Cynics might call this government of, by and for the corporation. I say that is the stock market's favorite form of government," concluded Cramer.
Off the charts
The market has been rallying and Cramer wanted to find out if the rally has legs to continue. He went to the charts with the help of technician Mark Sebastian to find out the technical view.
"When everybody's bullish, it means there is no one left to buy. A healthy rally needs plenty of bears who can be persuaded to change their minds," said Cramer. The first red flag that Cramer saw was the Weekly Investors Intelligence survey of bullish and bearish newsletter writers. There were 60.2% bulls, 18.4% bears and 21.4% expecting a correction. Historically, more than 60% bulls means the market is about to top out.
The VIX calculated the fear gauge of the market and currently it is trading at a low of 12. VIX moves in the opposite direction to the market. Sebastian also noted that VIX behavior was very normal in the wake of Donald Trump's victory and it went lower as the S&P went higher. However, VIX spiked 14% in the last week going into the long weekend even when the market was down by only 1%. This is a quiet period for stocks so he was concerned about the spike in VIX.
On Tuesday, the market went up and VIX fell which is a sign of normalcy. "Rather than being a genuine sign that we should be worried, it was more a factor of low volume, combined with some tax-loss selling and the fear of a New Year's terror event," said Cramer.
Sebastian thinks the market is poised to head higher while the Investors Intelligence survey says otherwise. Cramer anticipates that a major reversal will not occur without a negative catalyst.
Something bizarre happened on Tuesday; crude went down but the oil and gas stocks went up. This hasn't happened many times in 2016. The decoupling of oil and stocks is rare and could be a possibility under President-elect Trump. "Don't let the analysts talk you out of oil stocks or natural gas stocks. This regime wants oil and gas companies to make more money, so I think they will," said Cramer.
The decoupling is attributed to oil companies cutting costs, OPEC agreement, mergers and acquisitions in the oil patch and analysts downgrading stocks. "Analysts who downgrade these stocks simply aren't taking into account what a pro-fossil fuel president can bring to the oil and gas party," he added.
Trump can also rein in the Environmental Protection Agency, which has been tough on the safest drillers too. He can speed up pipelines to make them a cheaper and safer alternative to trucks and trains.
Rex Tillerson was nominated for secretary of state and he has divested and cashed out his holdings. Cramer thinks he will do a good job promoting US business overseas, especially the business of oil. "Republican presidents tend to be very oil-friendly, but Trump has taken this to a whole new level, and he hasn't even been sworn in yet!" said Cramer.
The decoupling of oil and gas stocks from the price of crude will send energy stocks higher.
CEO interview - Dominion Resources (NYSE:D)
Dominion Resources is one of the largest players in the utility space. Utility stocks tend to be bond market equivalents which investors swap out of as the bond yields rise. Cramer thinks Dominion Resources has additional businesses that could benefit from the Trump administration. He interviewed chairman and CEO Tom Farrell to hear what lies ahead.
Farrell mentioned that Dominion is different from its peers due to the large gas infrastructure business. "The gas infrastructure will be almost half of the cash flow earnings stream of Dominion Resources, which makes it quite unique," he added.
Farrell also believes that deregulation will help everyone but the effects of tax reforms are yet to be seen. It will take a long time for the new government's pro-fuel stance to bring in rule changes that affect the company's legacy coal-fired plants.
In his opinion, new technology and cheap natural gas will lower the electric rates for customers and this cannot be achieved by Trump via an executive order. Cramer said he likes Dominion Resources and it yields 3.7%.
CEO interview - MindBody (NASDAQ:MB)
Health and wellness is a powerful trend with influencers like Oprah endorsing weight loss programs. MindBody is the cloud-based provider of business management software tailored to the fitness industry. Its stock rallied 7% after they announced a partnership with Google to pilot new fitness booking integration. Cramer interviewed chairman and CEO Rick Stollmeyer to find out what lies ahead for the company.
Stollmeyer said that the company has moved up from 1,000 subscribers in 2005 to 58,000 in the recent quarter. The company is growing revenue at 35%. He explained that small and medium businesses have difficulty with scheduling and tracking customers and staff.
MindBody provides one solution that not only takes care of scheduling and tracking, but also handles payments. They have spent $28M in R&D in the last year to become a leader in this space. They also take care of the customer's side of things by managing reviews for classes, trainers and fitness centers and across consumer portals and apps.
The company makes money via subscription fees and as a payment processor. They have processed $6.2B worth of payments.
Viewer calls taken by Cramer
Under Armour (NYSE:UA): It's a good stock as Cramer believes CEO Kevin Plank is a competitor.
Disney (NYSE:DIS): It's a good stock and Bob Iger is doing everything right.
Energy Transfer Equity (NYSE:ETE): It's a good stock but don't buy more.
Chesapeake Energy (NYSE:CHK): They are much better run now.
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