Pharmaceutical Stocks Are Ready To Rally - Cramer's Mad Money (3/1/17)

by: SA Editor Mohit Manghnani


Market has changed its stance after Trump's speech.

Emcor and MasTec will benefit from investments in infrastructure.

Don't buy Polo Ralph Lauren as apparel group is in trouble.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday, March 1.

What changed after Trump gave his speech in Congress? "The impossible 24 hours ago now seems downright likely today, which is why we put on such a magnificent rally," said Cramer. Up until Tuesday, the bears proclaimed that the Trump rally is over and investors should book profits and exit. The market, however, thinks otherwise.

After Trump's speech, many investors think Democrats could get used to the idea of repatriation of foreign cash and lowering the corporate tax rate. Trump also got support for his infrastructure plans.

The markets also rallied as things have improved globally that have nothing to do with Washington. Many sectors that had gone down were actually consolidating so that they are ready to rally higher. This is common.

Cramer said that investors should never short a dull market. He added that the market is full of bullish rotations and many groups have consolidated to rally higher. "This is a bull market," he said.

Cramer spoke about his early days in the stock market where anyone could call a bull market. It's difficult now as the one who called a bull market will be picked on if things go bad. On the other hand, no one criticizes money managers who exit investors and deny them huge profits.

"If everyone is cowed and so few have the courage to say this is a bull market and it is hard to bet against, then you are going to have moments like today where the whole thing just explodes higher," concluded Cramer.

Off the charts

How will pharmaceutical stocks fare under the Trump era. Has the group bottomed and is it ready to rally? Cramer went to the charts to get a technical view on pharmaceutical stocks with the help of technician Bob Lang. Be it Hillary Clinton or Trump, their stance on drug pricing has taken a toll on the sector. Lang checked the charts of Pfizer (NYSE:PFE), Merck (NYSE:MRK), Eli Lilly (NYSE:LLY) and Allergan (NYSE:AGN) to get a read on the sector.

Pfizer has the best chart among the four as the stock has made a series of higher highs and lower lows. The Chaikin Money Flow oscillator is about to get into positive territory. In the same instance last time, Pfizer had rallied 20%.

Merck, on the other hand, had a great 2016 and has rallied 12% in 2017. The weekly chart shows that the run was on strong volume proving it is legit and can continue. The stock has a ceiling of resistance at $64 which is likely to be breached.

Eli Lilly is up 14% for the year. It broke the ceiling of resistance at $82 and is trading above it. The MACD indicator has made a bullish crossover at the start of the year which means the stock has more room to run. "I feel like you might be chasing with this one, but Lang believes that Lilly's got more room to run," said Cramer.

Finally, Allergan's chart has shown the bullish 'W' pattern and has broken its downtrend making higher highs and higher lows. The MACD indicator made a bullish crossover in late December.

Pfizer was Lang's favorite but Cramer prefers Allergan based on its product pipeline and strong fundamentals.

Infrastructure stocks

After Trump's speech, the infrastructure stocks rallied as Trump reiterated his plan to boost infrastructure spending. "Emcor (NYSE:EME) and MasTec (NYSE:MTZ) are quintessential Trump stocks, the kind that have a right to roar if the new, kinder, gentler Trump comes to the hill more often," said Cramer. Trump does not want to spend $1T directly but wants to give tax credits so that companies can invest in $1T worth of projects.

Emcor and MasTec will benefit if Trump gets his way on various issues of infrastructure, but the stocks will do well without the infrastructure bill.

Emcor had a soft quarter but that was mostly due to one-time losses. They reported weaker than anticipated guidance and the stock got crushed. Cramer thinks Emcor can do well due to growth in nonresidential construction while MasTec will benefit in communications business from implementation of 5G.

"I like Emcor as a value play here, and MasTec is on fire, although I hate to chase, so I suggest you wait for a pullback in that one before you do any buying," Cramer said. "Or if you justifiably can't resist, then buy some now and wait to buy the rest until it comes in," said Cramer.

CEO interview - Veeva Systems (NYSE:VEEV)

Veeva Systems reported a strong quarter and its stock rallied 2%. Their stock gained 70% in the last year and the company's platform Vault is built to make the life science industry more efficient. Cramer interviewed founder and CEO Peter Gassner to hear more about the quarter.

"We went public about three years ago and Vault was a $15M business, now it is at a $220M run rate and actually last quarter we announced we signed our two biggest Vault deals ever," said Gassner.

Veeva is able to deliver both high growth and profits unlike other cloud players, along with remaining compliant.

Viewer calls taken by Cramer

Polo Ralph Lauren (NYSE:RL): Retail is tough.

Del Taco Restaurants (NASDAQ:TACO): The restaurant group is in pain.

American Outdoor Brands (NASDAQ:AOBC): It's okay to buy at current levels.

Cheniere Energy (NYSEMKT:LNG): Cramer is not a fan as he was after the CEO was fired.


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