Market Is Seeing A Rotation - Cramer's Mad Money (5/4/17)

by: SA Editor Mohit Manghnani


Intel's fast-growing businesses comprise 50% of its revenue and profits.

Don't risk betting against the might of Elon Musk.

Nucor is the best in the steel business.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday, May 4.

Given that the Fed did not change its statement of two rate hikes and the market is waiting for Friday's job report, it turns into a complex environment that investors need to understand. When that happens along with a fall in commodity prices, it leads to a classic stock rotation where money managers get into safe stocks like consumer packaged goods and exit the ones that are in the forefront, like energy stocks.

The bank and interest rate-sensitive stocks did well as the Fed held its two interest rate hike agenda. Money managers sold energy stocks like Chevron (NYSE:CVX), Pioneer Natural Resources (NYSE:PXD) and Occidental Petroleum (NYSE:OXY) and bought safety stocks like consumer packaged goods and insurers, along with biotech stocks that do well irrespective of the economy. That's why AIG, Regeneron (NASDAQ:REGN), Clorox (NYSE:CLX) and Kellogg (NYSE:K) all rallied.

"Don't get too comfortable with this rotation, though, because tomorrow we get that non-farm payroll number from the Labor Department. It's going to wipe today's slate clean and give you a new one to draw on. So, while you might've expected the market to rally on the successful healthcare vote in the House, the riptide of oil and worries about payrolls put a lid on what could've been a raucously positive session," concluded Cramer.

CEO interview - Intel (NASDAQ:INTC)

Intel reported revenue growth with a slight earnings beat. Cramer interviewed Intel CEO Brian Krzanich to know his take on the core PC business and the future of technology.

"This is the best time, I think, in history to go out and buy a PC or be in the PC business because the innovation is tremendous," said Krzanich. The CEO admitted that customers are buying fewer PCs, but he is enthusiastic about Intel's reach. "There are other places that people are spending their dollars, so I can't come in to you and say, 'This is a revenue growth engine.' But we've been able to grow profitability and we've been driving innovation with our partners," he noted.

Intel has restructured its operations in the last few years, and its growth businesses like Internet of Things comprise more than 50% of the revenue and profits. The company's recent acquisition of Mobileye (NYSE:MBLY) will give it a head start in the fast-growing self-driving space.

"Mobileye was a big stake around autonomous vehicles, and those are going to be cars, and within our lifetimes it's going to be things that fly. Intel would achieve those goals by making each vehicle a complete technological platform," Krzanich added.

He also spoke about repatriation and corporate taxes and mentioned that the additional money will be for the benefit of the country and not just Intel.


Tesla stock reversed after the company's earnings and conference call. "If you're an analyst, I think the only way to handle an Elon Musk conference call is to take some mind-altering drugs so you can really tune in and turn on the whole psychedelic story," said Cramer.

All his answers were sensational. When he was asked about Tesla's possibility of reaching $700B market cap, Musk said, "Well, now, I am going to want to preface this by of course saying I could be completely delusional, but I think I can see a clear path to that outcome." Cramer noted only Elon Musk had the confidence to pull this statement off.

On the question of whether Tesla can make 1M cars by 2020, Musk said the company could do so after introducing its Model Y. When questioned about whether the removal of government subsidies will hurt the company, Musk said they are hurting Tesla now by keeping weak competitors around.

"So, just in case you thought there was an inventory problem, just in case you thought there was a demand problem, just in case you thought he was off course in market cap, just when you thought that he was maybe hyping for production, the one thing you do know is you can't short this stock now, because by year end, you have to figure Musk could be saying that he's going to make a million cars in China by 2020; and you'll be hit by one of the biggest short-squeezes in history," Cramer opined.

"My take? Tesla makes for great theater, and while I think it's too risky to bet on this one, Musk's grandiosity makes it equally risky to bet against it," he observed.

CEO interview - Twilio (NYSE:TWLO)

Twilio stock got hammered even as the company beat earnings but gave a weaker-than-expected outlook and mentioned that its biggest customer, Uber (Private:UBER), has offloaded some of its services to other providers. Cramer interviewed founder, chairman and CEO Jeff Lawson to know more.

Lawson commented on Uber's spending cut saying, "Because of the size of the spend and how important of a customer they are, when we got an inkling that they might change how they're thinking about communications spend, we wanted to be transparent and get that out in front of investors. But we do believe they will continue to be a very important customer of Twilio's." Uber is not leaving Twilio outright, but is looking for different options across geographies.

Apart from Uber, the company's quarter was successful. "There is good news ahead for Twilio," Lawson added. It has acquired 4,000 new customers and hired a new COO to take things forward. "We're continuing to invest. We have a leadership position in a very large market, and we feel great about our position, about our product, about our customers. And so we continue to invest forward," he concluded.

Viewer calls taken by Cramer

AK Steel (NYSE:AKS): Nucor (NYSE:NUE) is the best of breed in steel.

Carlyle Group (NASDAQ:CG): Hold on to the stock until the markets get better.

Amazon (NASDAQ:AMZN): It's a great revenue growth story. Stick with it.

O'Reilly Auto (NASDAQ:ORLY): The auto business is under a lot of pressure. Don't sell it this low.

Ford (NYSE:F): It's going to be a down year for Ford. If one is patient for a year, it would pay to hold the stock based on its yield.


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