Which Stocks Are Immune To Trade War? - Cramer's Mad Money (7/11/18)

by: SA Editor Mohit Manghnani

Canopy and Constellation Brands may introduce weed-based beverage.

Chevron is a better pick than Exxon due to growth.

PayPal has more upside than Square.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday, July 11.

The market sold off on Wednesday on the usual trade war fears. When that happens, the list of stocks selling off remain the same - the ones with exposure to China. Boeing (NYSE:BA) is sold whenever the trade war fear looms, but Cramer said that the demand for airplanes will remain the same. He's worried about the domestic airlines though, as the revenue per seat mile is going down on more than required supply and rising fuel costs.

Caterpillar (NYSE:CAT) also sold off as it has 20% revenue from Asia. Cramer feels it shouldn't be judged so quickly. United Technologies (NYSE:UTX) sold off as their Otis division sells 600,000 elevators in China. Cramer said those elevators still need to be serviced so that business is not going away. Honeywell (NYSE:HON) and 3M (NYSE:MMM) were other industrial stocks that went down.

Bank and FANG stocks remained immune to trade war fears. The banks are returning a lot of capital to shareholders in the form of buybacks and FANG stocks have little-to-no China exposure. Other winners are Mastercard (NYSE:MA) and Visa (NYSE:V). They are not allowed to do business in China. "A simple call to Ajay Banga over at Mastercard or Al Kelly over at Visa to tell them they are welcome to come in without a bogus joint venture might actually be enough to get President Trump to call off the trade dogs of war," said Cramer.

Cybersecurity stocks like Proofpoint (NASDAQ:PFPT) and Palo Alto Networks (NYSE:PANW) are going up as cybersecurity threats from China will lead to more business for these companies.

COO interview - VMware (NYSE:VMW)

The stock of VMware has tripled in the last two years. Cramer interviewed COO Sanjay Poonen to hear his views on the Dell debacle and what lies ahead for them.

Poonen said that their data center unified solutions are the best for computer, storage and networking solutions. Their virtualization software is the best in class and has lots of opportunity to grow as migration to the cloud is still in the early stages. Citing the example of Brooks Brothers, Poonen explained how their software helps connect 500 locations to their data center.

Commenting on the Dell debacle, Poonen said that their company's focus was customer-centric. "Even while all of this sort of cloud of uncertainty existed in the last several months in our stock, there was no cloud of uncertainty around our customers and what they wanted us to do. They wanted us to bridge the private cloud to the public cloud and we told all our employees, from engineers to sales reps, focus on the customer. Focus on the partners," he added.

"The outcome, we actually think now, is a good outcome for all the shareholders. And Michael Dell on your network said he’s proud of VMware being an independent company. So that’s really good for all of us and our ecosystem," concluded Poonen.

CEO interview - Canopy Growth (NYSE:CGC)

In another interview with Canopy Growth, CEO Bruce Linton discussed legalization of recreational marijuana in Canada. It is the first purely marijuana-focused stock to list on a U.S. exchange and has 9.9% interest from Constellation Brands.

When recreational marijuana becomes fully legal in Canada this October, Canopy and Constellation may start working on marijuana-infused beverages. "We expect we’ll be able to make beverages and those beverages will be no calorie, they will cause you to feel upbeat. We’re talking about going into a bar and having a tweed and tonic," said Linton.

The beverages would boost Constellation Brands exposure to Canada and will be targeted to two audiences: "Those who want to relax after a busy day and those who want some energy before a night out," he added.

"We are, in the second half of 2019, going to be able to introduce a bunch of new products that will allow us to compete better with the illicit market, because part of the public policy isn’t just to make it legal, it’s to squeeze out the illegal," said Linton.

The company is also in Phase II clinical trials for treatment of insomnia. Canada is just the first step and they are already operating in 11 countries.

Off the tape

Cramer went off the tape to review the privately-held Bluestone Lane, the Australia based coffee chain with 21 locations which have sealed a partnership with RSE Ventures to accelerate growth. Cramer interviewed founder and CEO Nick Stone and RSE Ventures CEO Matt Higgins.

Stone said that with 24,000 locations, Starbucks has lost its premium flair. "It’s definitely scaled and it’s definitely successful, but it’s not premium. When you look at the coffee space, people are looking for that escape, but it’s not really defined," said Higgins.

"Customers are looking for something different, particularly younger ones, and they’re looking for healthier food, better quality service, better quality coffee and tea product. They’re looking for more curated environments, places where they can escape. And that’s what Bluestone’s about," said Stone.

Bluestone wants the ability for someone to disconnect in this rapidly increasing digital world and become a social community. "That’s the way it is in Australia. Starbucks failed in Australia. It’s the land of independence and we want to bring more of that to the U.S. and beyond," said Stone.

Viewer calls taken by Cramer

Marvell Technology Group (NASDAQ:MRVL): It's a well-run company that will get through trade war fears but their upside remains capped.

Snap (NYSE:SNAP): Why buy Snap on tie-up with Amazon (NASDAQ:AMZN) and not buy Amazon instead?

Square (NYSE:SQ): It has moved up a lot. Look at PayPal (NASDAQ:PYPL) which has more upside.

Exxon (NYSE:XOM): In big oil, Chevron (NYSE:CVX) is a better pick due to growth, although Exxon is good too.


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