Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, January 30.
"Politics and money do mix, they just don't mix all that easily when it comes to the stock market," said Cramer. No matter how pro-business the president is, any issue that is unrelated to business and causes uncertainty will affect stocks, as investors hate uncertainty.
As soon as the immigration ban was passed, Trump stocks sold off and institutional investors used the political negativity to buy high-quality stocks. The investors realize that visas, green cards, refugees or immigration will not affect earnings.
"The stock market is simply weighing controversial political news versus equity valuations, and it likes those valuations when the smoke clears," added Cramer. When CEOs spoke against Trump, Cramer said he cannot remember seeing such an outcry from executives before.
The Mad Money host added that investors buy stocks not because of CEO politics, but on fundamentals, and this memorandum is unlikely to affect fundamentals. The only worry Cramer has is that Trump may target a company. "Trump never backs down from a fight, so he might feel the need to retaliate, and that has got to be a factor going forward when you are thinking about buying these stocks," he said.
How to profit from Trump's comments
Whenever President Trump speaks, he moves the markets. "As long as we are ready for his comments, we can profit from them," Cramer noted. He added that investors should get used to his comments and not freak the market every time he says something.
Trump negotiated the cost of Lockheed Martin's (NYSE:LMT) F-35 by $600 million. This is a win for the government, and it will not hurt the company that badly. On Monday, the president sat down with small business leaders and said he wanted US oil tube makers to benefit from deregulation. Cramer calls it a big deal, as many drilling sites do not use American-made steel. "When you hear the president muse on trade and on steel pipe, immediately you need to be ready to jump on U.S. Steel (NYSE:X), as long as the numbers away from oil country tube are looking good," he advised.
He adds that trading should not be based on what Trump says, but investors should also do their homework and be ready for the trade and investment.
"This president attacks and parries and surges and negotiates in the open in a way that impacts stocks constantly, in real time. This president can impact stocks like no other in history, both positively and negatively," said Cramer.
Know your IPO!
In the Know your IPO! segment, Cramer reviewed REV Group (NYSE:REVG), which is a maker of vehicles such as school buses, ambulances, fire trucks, street sweepers, mobility vans and RVs. Tim Sullivan is the CEO of the company, who has a history of making brilliant deals. REV Group debuted at $22, went public at $22 and is already at $25.65.
The company has the leading market share for ambulance, school buses, medium-sized commercial buses and light broom sweepers, is second in fire apparatus, terminal trucks and also has a decent share in RVs. More than 72% of the business of REV Group comes from the end market, where it is either a leader or second best.
All of its markets have strong long-term trends, as growth in elderly population in the US could mean a need for more buses and ambulances. Many fire trucks need to be replaced, as during the Great Recession, states and municipalities fell behind historical replacement rates. REV Group is unique, as it is the only company that covers all three categories. "That gives them tremendous bargaining power to get lower prices from their suppliers," Cramer said.
On the other side, the company has an ugly balance sheet, which had $260 million in debt three months ago. Some of the IPO proceeds were used to pay off debt, but the balance sheet still doesn't look in good shape. REV Group also trades at a hefty 40 times current year earnings. The company's growth is dependent on the health of the US economy.
"While I adore Tim Sullivan, I think it is too soon to tell with this one, and I would stay on the sidelines until we are sure that the business can grow fast enough to accommodate its expensive valuation," Cramer concluded.
CEO interview - United Rentals (NYSE:URI)
United Rentals stock rallied after blowout earnings last week. Cramer interviewed CEO Michael Kneeland to know what lies ahead.
"What we noticed as we went through the fourth quarter, we really saw a pick-up of demand in December, which was a little unusual off-season," said Kneeland. The rising employment has been a key driver for the company's business, and Kneeland is seeing more confidence from CEOs this year as compared to last year. The company also used its cash flows for acquisition, which allows it to grow.
He commented on the Trump agenda saying increased spending in infrastructure, oil-related business and a border wall would be beneficial for United Rentals' bottom line. Cramer called United Rentals a Trump stock.
Viewer calls taken by Cramer
Ulta Salon (NASDAQ:ULTA): This is one of the few retailers that you can own.
Lululemon (NASDAQ:LULU): It is one of the niche retailers that Cramer can get behind.
Lockheed Martin: Trump's comments did not affect the stock much, but Cramer thinks selling Lockheed and buying General Dynamics (NYSE:GD) is a good idea.
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