Economy Is Cooling - Cramer's Mad Money (11/1/18)

by: SA Editor Mohit Manghnani

Drug stocks are not safe anymore.

GW Pharma CEO Justin Gover talks about their latest drug Epidiolex.

Don't arbitrage on Red Hat.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday, November 1.

President's softening stance on China and Fed not raising rates are the two events the market wants. That's what happened on Thursday when Trump tweeted China and the U.S. had their first good talk. The ISM manufacturing Index also showed that the economy is beginning to cool. This report might be what the Fed needs to put a brake on rate hikes. Prices of oil, wood and metal are also going down which would take care of inflation.

However, the employment report on Friday could put a dent on this. With the economic data and Trump's tweet on China, the market rallied and stocks like Starbucks (NASDAQ:SBUX) for whom China is their fastest growing market went up on good earnings along with other semiconductor stocks with Chinese exposure.

Lastly, Apple (NASDAQ:AAPL) reported and the stock went down by 7% in AH trade on guidance. Cramer said their earnings were good and it ran up going into the quarter. He is not worried about the decline as Apple's ecosystem continues to grow and said the stock going under $200 as a buying opportunity.

Drug stocks

In times of weakness, drug stocks used to act as defensive or safety stocks as the state of the economy does not affect them. However, the scenario today might be different.

Cramer had been a fan of drug stocks, but the action in them lately has made him changed his stance. Allergan (NYSE:AGN) had a good quarter but market is worried about CEO Brent Saunders not bringing out value fast enough. AbbVie (NYSE:ABBV) is going down due to competition. Gilead Sciences (NASDAQ:GILD) has been trying to turn itself around with deals but the results are not expected soon.

When stocks like Baxter (NYSE:BAX) can lose 10% in one day, it's not worth putting money on. "Safety's last with these guys now. These stocks are something like Donna Summer, 'cause when they're bad, they're so, so bad," he concluded.

CEO interview - GW Pharmaceuticals (NASDAQ:GWPH)

GWPH went up 7% on Thursday on news that FDA and DEA will allow them to sell their epilepsy drug in the US. Cramer interviewed CEO Justin Gover to know what this win means for the company.

Gover said the drug will have meaningful impact on the lives of patients. He said their company is about real science compared to other cannabis companies that term themselves as medical. "We think it's really important to distinguish between what is medicine and what is not. The Food and Drug Administration makes that determination, and where there are products that don't meet FDA standards and have not been approved by FDA, we don't believe that they should be appropriately termed as medications," he added.

"What this reflects is an understanding within the DEA and FDA and other circles of federal government that when you do real science, you produce data that provides evidence of safety and efficacy, and you manufacture product in a consistent way where you know exactly what is in it day in, day out," he said.

Physicians can now prescribe Epidiolex to patients as standard form of medication. "So we believe that the Epidiolex responds absolutely to that need and that our future products can similarly respond to needs in other parts of the medical community," he concluded.

CEO interview - Proofpoint (NASDAQ:PFPT)

The stock of Proofpoint went down after reporting good earnings and rallied 2.8% on Thursday. Cramer interviewed CEO Gary Steele to know his take on cybersecurity.

Steele said cybersecurity is a great business as the threat on the virtual landscape is rising, and with more data, companies have to protect themselves. Proofpoint's business is growing as companies move to the cloud. They are finding tough to recruit smart people as the labor market is tight.

Commenting on competition from rivals like Microsoft (NASDAQ:MSFT), Steele said it's acting as a catalyst for Proofpoint as customers want a comprehensive security solution. He adds that even SEC has started taking cybersecurity threats seriously and warning companies to look at their infrastructure.

Viewer calls taken by Cramer

Red Hat (NYSE:RHT): It's not worth arbitraging.

Akorn (NASDAQ:AKRX): It's doing bad. Cramer does not see it changing.


Jim Cramer's Action Alerts PLUS: Check out Cramer's multi-million dollar charitable trust portfolio and uncover the stocks he thinks could be HUGE winners. Start your FREE 14-day trial now!

Get Cramer's Picks by email - it's free and takes only a few seconds to sign up