Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday, June 15.
The market turned positive towards the end of Friday after ignoring fears of the trade war with China. Cramer found this illogical and said the coming week will be important to watch how the trade war fears play out. With that, he discussed the game plan for the week.
The retaliation from China on proposed $50B tariffs by Trump will be in focus. China placed retaliation tariffs on U.S. products including automobiles which will take effect from July 6. "Trump believes that we need to stand up to China, even if it ends up hurting business here in the United States and sending the stock market down. He figures the economy is strong enough to handle the pain. Basically, here's what he's thinking: if not now, when?" said Cramer.
"Get used to it. Select stocks accordingly, maintaining a higher-than-normal cash position. When we go higher, do some trimming," he added.
Cramer expects e-commerce beneficiary FedEx to report good numbers. He believes the estimates are too low. On the other hand, he was concerned for Oracle. It's one of the few tech stocks closer to its low. They have trouble keeping the customers. However, it's so low that the risk-reward ratio is decent.
Winnebago Industries is a competing RV maker with the likes of Thor Industries (NYSE:THO). If they confirm in their earnings call that they have excess inventory, both stocks will go lower.
Micron's Q3 is important as it will give investors an idea whether flash and dynamic random-access memory chips are slowing. "Not long ago, Micron's CEO, Sanjay Mehrotra came on this show and I thought he told a fabulous, multi-year tale of proprietary growth, very different from the boom-and-bust of the old DRAM business cycle. That's because Micron's chips are used far more extensively thanks to the rise of the internet of things," said Cramer.
He believes that the company is in control of its destiny.
Cramer's trust has been trimming its position in Darden after their weak last quarter.
Kroger has been struggling after the acquisition of Whole Foods by Amazon (NASDAQ:AMZN). "Kroger's engaged in a slew of initiatives to become more competitive. In the meantime, though, the supermarket industry just keeps getting more competitive. Let's just say I don't expect a great quarter," said Cramer.
Red Hat is one of the cloud kings which has been reporting strong quarters. The stock tends to go down after earnings despite it being good. Buy on weakness.
OPEC will meet on Friday and the outcome will impact the oil prices.
"Remember, though, with the rate hikes and the tariffs, the game got a little harder this week, which means we need to be a bit less eager to pounce when stocks go down and a bit more ready to curb our enthusiasm when stocks go higher," concluded Cramer.
CEO interview - Manitowoc (NYSE:MTW)
The stock of Manitowoc is off 35% in 2018 due to tariff fears. Cramer interviewed CEO Barry Pennypacker to find out how the trade war will impact the crane maker.
"We're not really too worried about that. If you were a good leader of a company and you realized that President Trump wasn't going to put the tariffs in place when he was being elected, then you were living in a bubble. So we put contingencies in place right then and there," said Pennypacker.
The fact is that the economy is booming and there are cranes everywhere, be it resurgence of the oil and gas industry or the expansion of wind energy, all of which need more cranes. "We knew exactly what was going to happen, we looked at the particular areas that we thought we were going to be affected by and we've changed around the different sourcing methods and, you know, we're not worried about it," said Pennypacker on steel and aluminum tariffs.
For many crane models, Manitowoc is sold out through 2019. The company is also paying down debts aggressively.
There is a new secular growth long-term trend - the subscription economy. "I think it's the rise of the subscription economy, the legion of companies that make their money by selling some kind of subscription service, often in industries where we never even realized subscriptions could make any sense," said Cramer. His perspective changed completely after speaking to subscription management company Zuora CEO Tien Tzuo.
"There's no reason you should have to buy anything. We used to have Netflix, we used to have Spotify, but now, we're paying for exercise bikes as a subscription, we're paying for travel as a subscription, companies are even paying for things like tractors as a subscription," said Tien Tzuo in the interview with Cramer.
There are clear winners of the subscription economy and some less obvious players. Netflix (NASDAQ:NFLX) and Spotify (NYSE:SPOT) are clear winners. "By paying a low monthly fee, you get access to a whole world of entertainment," said Cramer. They have 125M subscribers.
Spotify has 71M premium subscribers and had 41% subscription growth last year. "Turns out people will pay up even with the option to use Spotify for free," he added.
One of the less obvious players in the subscription economy is Apple (NASDAQ:AAPL). They make most of their money by selling phones and yet they have a strong and growing subscription service business. "The phones are the razors and the various subscription services that you pay for automatically are the blades. This is why I've been so sanguine about Apple even when the bears were ready to give up on it — the service revenue stream is going to be huge. In fact, it really is already huge," said Cramer. "If Apple's subscription biz were its own company, it would already be large enough to be about a Fortune 80 company," he added.
Amazon (AMZN) is another beneficiary of the subscription economy. "The key here is that Prime creates legions of loyal customers who have a huge incentive to shop at Amazon first and only go to another retailer if they can't find what they need," said Cramer.
The New York Times (NYSE:NYT) is also seeing gains after they changed their advertisement based model to a subscription based model for their content. They have 2.6M paying subscribers.
CEO interview - Centene (NYSE:CNC)
On Centene's annual analyst day, Cramer interviewed CEO Michael Meidorff to hear what lies ahead as the acquisition of Fidelis is nearing a close.
Meidorff is excited about the merger with Fidelis which received approval on Friday from the New York State Attorney General. This will make Centene the largest provider in the four largest insurance states.
"We know the contracts we've sold, the deals we've done. You take that going into '19, it says we're going to be a $69-plus billion company next year, up from $60B this year," said Meidorff. The combination with Fidelis will allow an efficient way of managing patients.
Centene is a tech company that provides healthcare. They have data which helps identify patients at risk of opioid addiction and that has helped lower addiction by 20% in the last year.
Viewer calls taken by Cramer
Enphase Energy (NASDAQ:ENPH): Be careful of solar stocks. It's much smaller than the likes of First Solar.
Carvana (NYSE:CVNA): The industry is okay. Book profits and let the rest run.
American Tower (NYSE:AMT): Cramer is worried about consolidation in telcos. He's cautious about the stock.
Starbucks (NASDAQ:SBUX): Lots of people believe in the stock due to China's growth. Cramer's trust sold the stock as it was getting tough to own.
Blue Apron (NYSE:APRN): Don't sell it.
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