The Bullish News Cycle - Cramer's Mad Money (4/20/17)

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Includes: AABA, AAPL, AMZN, AXP, AXTA, BURL, CSX, EBAY, FB, GOOG, GOOGL, GPS, HAL, NUE, SHW, SLB, SNA, TRV, UL, VAL, VZ
by: SA Editor Mohit Manghnani

Summary

Axalta is the winner in Sherwin-Williams's Valspar acquisition.

Retail is not dead yet.

Halliburton is a long-term buy.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday, April 20.

There are some days where the bullish news cycle comes together, and Thursday was one such day, according to Cramer. "There are a couple of joyous weeks every quarter, where we hear from individual companies that their collective results are actually able to control the agenda of trading. They serve as the preponderance of the evidence about how companies are really doing, how their stocks should perform, and by extrapolation, how strong or weak the broader economy may be," he added.

The macro news was favorable, as interest rates are on the rise and European markets showed strength. Treasury Secretary Steven Mnuchin said the tax reform could come soon. On the micro side, the earnings were good. American Express (NYSE:AXP) reported a good earnings beat. "Buried within the AmEx conference call was an amazing statistic: 60% of the new leads for cards are coming from digital, which, to me, was a call to buy the stocks of Alphabet (NASDAQ:GOOG) and Facebook (NASDAQ:FB), the natural winners when ads are placed on the web," Cramer said.

There was good news from rail transport company CSX Corp. (NYSE:CSX), which saw growth in all of its businesses. Steel maker Nuecor (NYSE:NUE) showed growth in steel production and use, along with a positive Q2 outlook. Europe had positive news as packaged foods giant Unilever (NYSE:UL) reported strong earnings.

There were positive research notes on Apple (NASDAQ:AAPL) calling for the iPhone super-cycle. "While you know I hate that term, it sets up CEO Tim Cook for failure, and we don't want that; I understand the sentiment," said Cramer.

The disappointing news in the day came from eBay (NASDAQ:EBAY), Verizon (NYSE:VZ) and Travelers Companies (NYSE:TRV), which was buried in the positive news overall. "Today was a day for guys like me... guys like me who like to put together the mosaic from individual companies and reach our own conclusions. Those conclusions were almost uniformly bullish. And that, not oil, not bonds, not Trump, gave you this beautiful one-day rally," the Mad Money host concluded.

CEO interview - Snap-on, Inc. (NYSE:SNA)

The stock of high-end tool maker Snap-on rallied more than 5% after the company reported strong earnings on Thursday with 4.1% organic growth. Cramer interviewed CEO Nick Pinchuk to know more about the quarter.

Pinchuk spoke about Snap-on's ability to scale up and his visit to the president. "What I told the president is one of the key things about Snap-on, is our people generate customization in the midst of consistency," he said. He added that Trump was interested in learning about American manufacturing and American workers in the company's 11 facilities throughout the U.S. and 11,500 employees worldwide.

The CEO spoke about the company's scalability as its SKUs keep growing exponentially. "We keep improving our processes, but we have more and more customization. So our SKUs just keep expanding, but because we have capable people trained that are very, very skilled, we can manage that consistency," he added.

Snap-on's diagnostics business is booming, thanks to computer-connected cars as well as consistently growing European sales. Its thermal imager, for example, can help mechanics diagnose problems in a fraction of the time. The company will debut new tools for a host of industries so that everyone gets the tool they need.

Cramer called Snap-on an attractive play.

Paint stocks

Cramer said the Sherwin-Williams (NYSE:SHW) and Valspar (NYSE:VAL) was a good deal for both companies, but Axalta Coating Systems (NYSE:AXTA) is the real winner of the deal.

For the merger to close, the regulators had asked Valspar to divest a part of its business. As a result, the company sold its North American Industrial Wood Coatings business to Axalta for $420 million. Shares of Axalta have not moved on the news, which is a big mistake, according to Cramer.

The wood coatings division was sold at just nine times earnings, when it would typically fetch 13-15 times earnings. The deal makes Axalta a buy, as it will be accretive to the company's earnings and will help it diversify from autos and housing.

Although the Valspar deal is good for Sherwin-Williams, Axalta became an indirect beneficiary.

Retail

Cramer interviewed Matthew Boss, the managing director of department and specialty stores at JPMorgan Chase, to find out his viewpoint on retail. Cramer doesn't usually interview analysts, but this was a special case, as Boss is bucking conventional wisdom and saying now's the time to buy, not sell, the retailers.

Boss said the rare winners in the retail sector will be those with two aspects that he believes are key to staying afloat during the rise of e-commerce: value and convenience. "Convenience is Amazon (NASDAQ:AMZN), convenience is e-commerce. It's value and convenience. That's what the off-price sector has today," he added.

In the last 18 months, 4000 store closures have been announced, and most of them are department stores. The biggest obstacles of department stores are value and convenience, and the store closures could signal a U-turn in the sector. "It's a big step in the right direction. I think this is still multi-year, but the companies know what they're up against, they know about the brick-and-mortar versus the e-commerce," he said.

The retailers which have Boss' ideal trifecta - convenience, value and innovation - have emerged as winners. The off-price, dollar stores and athletic sectors are strong. "I think there's real opportunity to own retail here - you just still need to be selective. You look at the off-price sector. The world is coming to them," he noted.

Burlington (NYSE:BURL) has the opportunity to double its margins and its store count. "We're seeing Old Navy solidify. That's half of the story here. So last quarter, you saw Old Navy really outpace the retail sector. I think you're going to see the same thing this quarter." Boss also said The Gap (NYSE:GPS) stores have a set-up like that, and he would not short the stock. He had earlier been negative on the stock, but has a different stance now.

"I think we're just at the tip of the iceberg of people starting to focus on that, where you think about the market share opportunity for long-term survivors. I think if we've hit that peak, these closures will continue, but the real key is, how many year over year?" Boss mused.

Viewer calls taken by Cramer

Halliburton (NYSE:HAL): As long as Schlumberger (NYSE:SLB) doesn't call the bottom, Halliburton will get hurt. It's a long-term buy, though.

Yahoo (YHOO): It's a holding company, but don't fill the truck with the stock. There are better stocks.

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