When The Market Gets It Wrong - Cramer's Mad Money (8/23/18)

by: SA Editor Mohit Manghnani

How did Williams-Sonoma surprise the market?

AMD is growing faster than Intel.

Planet Fitness has a good business model.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday, August 23.

The earnings season is almost over, and looking back, there was a lot of drama. The market's reaction to some earnings was bizarre. "The market's idiocy? Well, let's just say it's your opportunity," said Cramer. Case in point: Home Depot's (NYSE:HD) earnings; the stock went up by $3 on a good earnings quarter, but fell by $2 when management took questions on the slowdown in housing on their call. This was a buying opportunity as the stock has gone up $8 since.

The same was the case with Lowe's (NYSE:LOW), which reported a good quarter but the stock went down as the company trimmed FY revenue forecast. When CEO Marvin Ellison announced on the call that they are closing all of the company's Orchard Supply Hardware stores, the stock reversed its losses.

NVIDIA (NASDAQ:NVDA) also had a good quarter, but the stock fell as the company cut revenue forecast on crypto-related weakness. Days later, the company announced its new line of graphics chips and the stock erased its previous losses.

Cramer said investors should watch for such stocks to take advantage. Another example is Children's Place (NASDAQ:PLCE), which had a great quarter and the stock went up in premarket trading only to reverse all gains and close down 1%. "The naysayers were focused on why Children's Place isn't making even more money per share," he added. However, the company said they are shifting manufacturing away from China to avoid potential impacts from tariffs and reported strong same store sales growth. Cramer thinks the stock will turn around.


Williams-Sonoma (NYSE:WSM) had a monster earnings beat and the stock closed 16.5% higher on the day. How could the market or analysts see this coming?

The company had lot going against it. It was in the retail sector which is under pressure, it competes with Amazon (NASDAQ:AMZN), has a huge mall presence, has rising freight costs and it's also caught in the crosshairs of trade war. "Intellectually it seems like it should be too much for retail, which was supposed to wilt under these pressures," said Cramer.

WSM is one of the most shorted stocks due to these reasons and hence the stock shot up when it surprised the street. The management of the company is strong and they said that the rising freight costs are offset by growth in their online business, which is cheaper. The company also has a multi-country supply chain and they plan to move production out of China to mitigate tariffs. "The loser won't be the American consumer. It will be those Chinese furniture companies," said Cramer.

The company is closing underperforming stores and is using brick-and-mortar stores as showrooms. Their new AI technology allows users to see how furniture would look in their home. "In short, every objection answered, every single objection, which is why it's the perfect totem for what's working at this very moment in retail," concluded Cramer.

Chip stocks

The idea that Advanced Micro Devices (NASDAQ:AMD) will be a better investment than Intel (NASDAQ:INTC) would have been laughable 10-20 years ago. But that has changed since CEO Lisa Su took charge in 2014. The company is seeing a good turnaround which is evident from its earnings and a slew of analyst upgrades.

As AMD restructured and refocused, it started taking share in the PC market, which has revived, along with market share in the growing data center business. On the other hand, Intel's growth has slowed due to delay in next generation chips and security issues in the current one.

This left enough time for AMD to get its foot in the door. Intel trades at a cheap 11 times earnings while AMD trades at 35 times earnings. Cramer thinks AMD is the one to own as it has better growth and it's not expensive considering the outlook till 2020.

Executive interview - Tellurian

Tellurian (NASDAQ:TELL) is one of the newest LNG exporters in the US. Cramer interviewed co-founder and chairman Charif Souki to know about their new projects and the impact of tariffs by China.

Souki said that Tellurian is confident in the natural gas business and it's buying up to $5T cubic feet of gas reserves for its export terminal.

Commenting on tariffs, Souki said, "If they impose tariffs on American gas, all that means is we'll receive different gas. It will substitute it. It's not a big deal. The demand for this stuff is so high that someone else will gladly take it off our hands. The trick is to make sure that we keep it affordable and attractively priced for the rest of the world."

America has cheapest gas in the world and they have huge supply. In fact, every day the country burns off 300 million cubic feet of gas, which is a byproduct of oil drilling.

Off the tape

Cramer went off the tape to review privately held ThirdLove, which is disrupting the women's intimate apparel industry. Cramer interviewed co-founder and CEO Heidi Zak to know more about their technology.

Zak said the company has created a convenient online experience for women to shop for apparel. They use data to manufacture half sizes of bras as research indicated that more than 30% of the women need them. They currently have 70 different sizes. The traditional retailers have limited shelf space and hence they cannot carry so many SKUs.

Their online fit finder has been used by 10M women and with each use, the system gets smarter to find the right size. The data allows the company to tailor market products to women and create specific segments for them.

Viewer calls taken by Cramer

Horizon Pharma (NASDAQ:HZNP): Book profits as there are better high growth healthcare companies.

Tandem Diabetes (NASDAQ:TNDM): It's a good stock and Cramer admitted he should talk about it more.

Planet Fitness (NYSE:PLNT): Cramer feels good about the company's business plan and thinks it has more room to run.


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