Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, October 8.
The bond markets were closed on Monday and there were cross-currents in the stock market. There were many camps trading on Monday which led to a mixed session. Cramer outlined those.
In the first camp were investors and traders who believe that the Fed will be aggressive to tame inflation by raising rates instead of taking a data-driven approach. These investors were buying stocks of consumer staples companies like Pepsi (NYSE:PEP) and Kimberly-Clark (NYSE:KMB), despite it getting a downgrade, and they sold the industrial stocks.
In the second camp, there are investors who believe the exact opposite of the first camp - they believe inflation will rise. Hence they were selling the high growth stocks because they will be worth much less in the long term. As a result, stocks like Service Now (NYSE:NOW) and Adobe Systems (NASDAQ:ADBE) were sold. These investors point to Amazon (NASDAQ:AMZN) raising wages and PPG (NYSE:PPG) raising prices as the sign of inflation.
In the third camp, there are people believing that interest rates have peaked and the market is oversold. They were buying stocks at the end of the day. "The bottom line? We saw a lot of different cross-currents at work today, but you have to be careful extrapolating from the action on a federal holiday. We will know more when the bond market opens tomorrow," concluded Cramer.
Is inflation going out of control a real cause of worry? Cramer dug into the jobs report to find out.
The biggest job growth was for the white collar workers who had lost their jobs due to automation. Thanks to large tax breaks, companies are hiring more which leads to a short-term spike in inflation.
The second biggest job growth sector was healthcare, that is fighting hard to keep costs tamed as new policies are put in place for drug pricing. Cramer thinks this sector will not lead to inflation either.
The job gains in the transportation sector are due to new rules that limit the number of hours that a laborer can work. This has led to a temporary shortage of truck drivers and each driver will produce less. "If it doesn't start going higher, we're going to be saddled with some real bad inflation from the supply chain: manufacturing to distribution to retail to your door," said Cramer.
Cramer thinks that inflation is not a real cause of worry as all these job gains will be offset by a slowdown in autos and housing. This is evident from the announcement by Ford (NYSE:F) on slashing their workforce.
The Fed needs to cool down on its rhetoric of raising rates.
Cramer's Power Rankings
Cramer said that not only sports, but stocks should have power rankings too. He will give the top five power rankings to stocks in each sector every day. His pick for Monday was Communications, which includes telecom, media and video game companies.
The top pick is Disney (NYSE:DIS). It's up just 8% for the year, trades at a paltry 15.5 times earnings and has growth ahead with all distractions gone.
The second rank goes to Alphabet (GOOG, GOOGL), which is trading at 24 times earnings but is still cheap considering the growth rate. It does not deserve to trade down in-sync with social media stocks as its core business remains strong.
The third pick is Take-Two Interactive (NASDAQ:TTWO) which is a few weeks away from its latest game release of "Red Dead Redemption 2".
The fourth rank goes to Viacom (NYSE:VIA), which is seeing a turnaround and is up 20% from its bottom.
Fifth rank goes to Netflix (NASDAQ:NFLX), which started going down after their latest quarter. "But Netflix is in a show-me mode here now, which is why it's only No. 5 spot despite being the best performer in the group year to date," said Cramer.
Zillow Group (NASDAQ:Z)
Zillow was known as one of the big disruptors in the real estate space and they were going strong. However, management has made bad decision after bad decision that has not only hampered growth but raised questions in the minds of investors. The stock has fallen from a high of $65 to $40 and it has still not found a bottom.
The company's last quarter was not good and they acquired mortgage lenders so they could begin buying and selling their own homes. All this happens as the interest rates were rising which is the worst time to buy a home. How did Zillow get this wrong?
Investors put their money in Zillow as a high-growth tech stock that is disrupting the real estate space. Instead, they are stuck with a company that has now got sensitive to interest rates. A slowing housing market is affecting them.
Viewer calls taken by Cramer
ORBCOMM (NASDAQ:ORBC): It's wireless messaging and Cramer does not see a point going down the food chain.
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