Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, March 5.
When Trump announced tariffs on steel and aluminum, Cramer discovered that money flows from where it's scared to where it's safe. "We saw this happen late Friday afternoon. It occurred again today," the Mad Money host said. The idea behind tariffs was to curb steel and aluminum dumping, and bears fear that trade partners will retaliate with their own tariffs that will lead to a trade war.
He believes that bear case is not strong enough, as the Chinese need the US markets too, since they are an export-oriented economy. They would not do anything to jeopardize it and risk a trade war. There have been no earnings estimate cuts from these actions yet, and the US is still a strong economy to offset any weakness in metals.
Some other reasons for the bear case not being strong enough is that Republicans will push back any additional trade actions and the tariffs just add a tiny amount to consumers' costs, while the recent tax cuts adds more to the pocket.
Cramer said this is leading to investors fleeing for safety to FANG stocks, for example. Facebook (FB) is safe, as it does not have a lot of Chinese business. Amazon (AMZN), on the other hand, is safe as China already has an e-commerce giant. China doesn't have Netflix (NFLX), and Alphabet (GOOG, GOOGL) is prohibited too. "Of the huge international companies I follow, Alphabet may be the least shortable off of the Chinese retaliation fears, or, you could say, the most buyable," said Cramer.
"The retailers are largely domestic, even if many of them sell merchandise that's made in China. The financials, with the exception of some very large banks, don't have China exposure. Healthcare? I don't think so. Those groups rallied hard today," said Cramer. Forget the bears and stick to what's working.
"There's just too much that is going right, people, and not enough negatives to do the job of keeping stocks down," he concluded.
CEO interview - Domino's Pizza (DPZ)
Domino's Pizza had a good last quarter, and there is some M&A chatter. The stock of the company is up 1,500% since CEO Patrick Doyle first made an appearance on Mad Money. He is stepping down as CEO on June 30, and Cramer interviewed him to review his journey.
Doyle said the company celebrated its 15,000th location around the globe, and the net economics for these stores remain strong. The 4.2% sales growth was in line with its guidance, and Doyle is ending his tenure on a high.
The company continues to invest heavily in technology. "You're clearly going to see transportation change around the world. We announced a second round of testing with Ford (F) down in Miami last week, so we are absolutely looking at it, we're investing aggressively, we're looking at how that transportation change is going to affect our customers, how they interact with us," he said.
The CEO also spoke about the tax reforms and that the savings will be used for dividends, buybacks and acquisitions, as the company wants to generate the most return for shareholders.
CEO interview - Nucor (NUE)
What do steel tariffs mean for the industry and the country? Cramer had steel maker Nucor's CEO John Ferriola on the show to share his views on the tariffs.
Ferriola said he does not buy into the argument that tariffs are unfair to US trade partners. "Please bear in mind that particularly the European Union, but most countries in the world, have a 25% or greater VAT - value-added tax - on products going into their countries from the United States. So if we impose a 25% tariff, all we are doing is treating them exactly as they treat us," he noted.
Since 1985, one-third of the US steel industry has been wiped out. This is partly caused by the Chinese dumping steel by keeping prices artificially low. The illegal and unfair imports in 2017 were 15% higher than 2016, even though an investigation was on by the US government.
"You see a steel industry that is being decimated in the United States. If that continues, I don't know how anyone can argue that we would be able to have a strong national defense. Without a strong domestic steel industry, the U.S. military could risk jeopardizing its defenses by building tanks and other weapons using cheaply made foreign steel," Ferriola added.
He said that the rise in cost due to tariffs will not be much. The cost of cars will increase by $160 for cars worth $36000, and the impact on cans will be less than a penny. Nucor has remained profitable despite the unfair trade, and enforcing trade laws would make things simpler.
"We're in a very, very cyclical business. We're at a good time in the cycle right now, but I would suggest that you go back and look at the tougher years in 2009-2010 and see how much of a struggle it's been for the entire industry during those down cycles," concluded Ferriola.
Trinseo is a chemical solutions company that manufactures styrene. This is a stock that no one pays attention to, but in the current state of the economy, it is ready to go higher.
Trinseo was created when certain assets of Dow Chemical were sold to Bain Capital in 2010. It was a terrific chemical company then in the worst part of the economic cycle. The stock is loved by money managers, as the economy is booming, the company's gross margins are expanding and it gave good guidance for the year.
The stock has rallied 22% in the last year, and yet, it trades at 8 times earnings. "Sure, Trinseo has rallied dramatically, but the economy is still in amazing shape, and this is exactly the kind of U.S.-based chemical company that does well when commerce is booming. I say Trinseo's a terrific buy, especially if we get another sell-off based on overhyped trade war worries," said Cramer.
Viewer calls taken by Cramer
Brick-and-mortar retailers: Cramer still thinks REITs and retailers are not immune to rising interest rates and e-commerce.
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