Market Is In Beast Mode - Cramer's Mad Money (1/2/18)

by: SA Editor Mohit Manghnani


Charts show 2018 will be good for stocks.

Top 5 winners of the Dow.

Book profits on Monsanto.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, January 2.

The first trading day of 2018 was good. "I swear people are bored with what's going on with stocks. Either they don't want to say anything good about the market because of politics, as the president has done a very good job of linking himself with the performance of the averages, or they're just prone to sleep," said Cramer.

He added that 54% of the U.S. citizens who own stocks are entering the market on a high note. Many investors are not talking about stocks but are focusing on Bitcoin instead. Cramer said, in the long run, equities always outperform.

"That's what progress is all about. Is it related to President Trump's policies? Look, love him or hate him, the answer is yes. That's what progress is all about. Is it related to President Trump's policies? The president has created a pro-growth environment and along with a new tax code that will take money from the government and give it to the corporations."

The S&P 500 has gained nearly 20% and almost all sectors have rallied. In the tech sector, FAANG stocks have rallied. Netflix (NASDAQ:NFLX) was up 4.7% and the semiconductor space has some good ideas. "The highest multiple tech stocks — the Adobes (NASDAQ:ADBE), the Salesforces (NYSE:CRM), the VMwares (NYSE:VMW) are finally on the move after being stuck in the mud," said Cramer.

In the energy sector, Schlumberger (NYSE:SLB) is a buy as oil crosses $60. The retail stocks were up on strong holiday sales and the boost in e-commerce helped logistics companies like UPS (NYSE:UPS) and FedEx (NYSE:FDX).

"The bottom line is simple: for whatever reason, the animal spirits triggered by the president's focus on deregulation, the bonuses being given to workers after the tax cut, the weaker dollar going into the earnings, the boom in the Southeast because of a glut of natural gas, the coming boost in earnings estimates thanks to the slashing of corporate taxes, we've got an incredible rally, and this kind of move is never boring. It's not a bull; it's a beast. And right now, it's in beast mode," concluded Cramer.

Winners of the Dow in 2017

Although the Dow index has just 30 stocks, it still matters just like the S&P 500 does. Cramer looked at the winners of 2017 from the Dow.

  • Boeing (NYSE:BA) topped the list with an 89% gain and it will not stop as their order book is increasing since more people are flying every year.
  • Caterpillar (NYSE:CAT) came in second with a 70% gain. Their U.S. business also matters now and it's not just about Chinese business growth. They may not repeat gains of 2017, but there is still more room to run.
  • Visa (NYSE:V) gained 46% in 2017 and it is still the financial stock to own for those who are scared of banks. Cramer sees a bright future for them.
  • Next on the list was Apple (NASDAQ:AAPL) which trades at only 15 times next year's earnings. Cramer reiterated that investors should own Apple and not trade it.
  • Wal-Mart (NYSE:WMT) gained 43% in 2017 due to their investments in e-commerce paying off. They are likely to gain big in 2018 as well.

Off the charts

Cramer went back to the charts of the Dow and S&P 500 with the help of technician Bob Lang to gauge what 2018 holds for the indexes.

The S&P 500 had a good weekly chart and for the first time, the index did not lose in a single month in 2017. There were two modest pullbacks but both served as buying opportunities. "With so much momentum coming into this year, Lang thinks it would be a big mistake to get too bearish on this one," said Cramer. In Q4, the S&P started to trade above its 50-day moving average which shows the strength of the rally. There was heavy institutional buying in November.

"Until we see any evidence that these institutions want to start selling en masse, and we have none, Lang thinks you should keep buying the S&P into any dip if we get one," said Cramer. Lang wouldn't be surprised if the S&P sees another year of double digit gains.

The Dow also gained 25% in 2017. Its weekly chart shows a good picture. The Chaikin money flow oscillator and RSI were both showing strength in 2017 as there was institutional buying. "From a momentum perspective, Lang says this chart is a thing of beauty. Volume trends are positive, the money flow remains very strong — what's not to like?" asked Cramer.

Lang did not want to call the top and predicted a 12-15% gain and a possibility of the Dow reaching 30,000. "No, we don't want to get too euphoric. No, we don't want to be complacent. But I also think it's a big mistake to get too cynical for your own good. Irony never made a dime for anybody. We've got a phenomenal bull market going here. Why don't you just enjoy it?" concluded Cramer.

Used cars

As the economy is booming, the used car market could see an up move soon. This means that stocks like CarMax (NYSE:KMX), AutoNation (NYSE:AN) and Carvana (NYSE:CVNA) will be in focus.

The stock of CarMax was flat in 2017 as their last quarter was not as good as expected. The company is consistent and their stock trades at 15 times earnings, which means it's still a buying opportunity for investors.

AutoNation has a similar story. However, they repurchased 9% of their stock to exceed analyst expectations. The stock still trades at 13 times earnings though.

Carvana is a good concept to sell cars but the company still needs to show results. Their last quarter missed analyst estimates and their high PE of 30 still needs justification. Cramer advised waiting for the company to show results before buying the stock.

Energy sector

Oil has crossed $60 again thanks to the OPEC cuts and a rising global demand. Natural gas is still down due to abundance in supply to the point that cold weather in Northeast was not enough to push it up.

The best way to play the sector is oil service stocks. Schlumberger is the only company on Cramer's radar that is worth buying. He said that drillers are victims of their own technological success as they can derive more from a single well. This means there is less incentive to drill more.

Don't buy the oil ETFs as they don't distinguish the good stocks from bad. The pipeline stocks are good and stocks like Magellan Midstream Partners (NYSE:MMP) and Enterprise Product Partners (NYSE:EPD) are worth buying.

Viewer calls taken by Cramer

Align Technology (NASDAQ:ALGN): They'll bounce back after profit taking. It's a buy.

Monsanto (NYSE:MON): Book profits.


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