Keep An Eye On Insider Buying - Cramer's Mad Money (11/5/18)

by: SA Editor Mohit Manghnani

Book profits on oil stocks.

New York Times is anything but failing.

Honeywell is a buy.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, November 5.

In a market dominated by news from all corners, there is one sign that shows confidence in a stock - insider buying. While company executives sell stock for many reasons, they buy it for only one reason - confidence that their company is undervalued.

When IBM (NYSE:IBM) fell from $153 to $115, five executives including the CEO bought stock. The stock rallied as a result and Cramer remains a fan of IBM and Red Hat (NYSE:RHT) as this is a bold move and this will boost their cloud business.

General Electric (NYSE:GE) CEO Culp also bought stock of the company last week. The company still has a lot of problems including its struggling power business and ongoing restructuring plan. Cramer reminded viewers of former CEO Jeff Immelt making similar buys which turned out to be ill-timed.

He remembered a similar buyback move from JPMorgan (NYSE:JPM) CEO Jamie Dimon and the stock has tripled since then. In 2016, he bought stock worth $26M and it has doubled since then.

Corporate buybacks like those from Berkshire Hathaway (NYSE:BRK.B) and Apple (NASDAQ:AAPL) are also a sign that executives think their company is cheap. Apple purchased $19.4B in stock in the last quarter.

"It's always worth taking these large insider buys seriously, although they don't always mean the stock is a buy," concluded Cramer.

Oil stocks

"You'd think that the price of oil would be soaring, but instead it actually closed down on the day," said Cramer, talking about Trump imposing sanctions on the world's third largest oil producer, Iran. Major oil players like Exxon (NYSE:XOM) and Chevron (NYSE:CVX) reported great quarters with high cash flows. With all this, oil going down seems counter-intuitive.

The economic reality is different from the company's outlook in Cramer's opinion. "If oil were really ready to roar, then the oil service stocks would be flying here. These companies make a fortune when producers put their money where their mouth is and open the drilling spigot," he added. Stocks of oilfield service companies like Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) are trading at multi-year lows and if the oil companies were really investing for growth, oilfield service stocks would rise.

Oil prices depend on many factors and with USA producing 11M barrels/day and Saudi keeping prices low, Cramer does not see a catalyst for oil price to go up. "I think demand for oil is slowing, perhaps slowing enough to cause a major breakdown in price," he concluded.

It's time to book profits on oil stocks.

New York Times (NYSE:NYT)

President Trump has repeatedly called New York Times a failing company, but their recent earnings say otherwise, which led to a stock rally. "This is one of those situations where all publicity is good publicity. Every time Trump criticizes the Times, he's making it more relevant, and I think that translates directly into more subscriptions," said Cramer.

The stock of New York Times is up more than 50% for the year thanks to strong growth in digital subscriptions. The print media is focusing on the online business. As they moved to "subscription-first strategy" instead of advertising in 2011, their subscription revenue accounts for 67% of their total revenue. The company added 200K subscribers in the last quarter alone.

The Trump administration generates lots of news and that is good for the subscription business. Consumers are also comfortable paying a small subscription fee instead of buying the product outright. This is evident from the success of subscription model businesses.

Cramer is bullish on the stock but he recommends buying on weakness of 5-10% as it has had a big run and trades at 28 times earnings.

Cramer's homework

Cramer does his homework on stocks he could not opine on earlier.

Fox Factory Holdings (NASDAQ:FOXF): The company engages in designing, engineering, manufacturing, and marketing performance ride dynamics products like bicycles, side-by-sides and on-road vehicles with off-road capabilities. The demand for their products is strong and Cramer thinks it can be bought.

Allscripts Healthcare Solutions (NASDAQ:MDRX): It engages in the provision of clinical, financial, connectivity, information solutions, and related professional services. It has a poor record and Cramer thinks it's not worth betting on the company after many disappointments.

Eros International (NYSE:EROS): It's an Indian media streaming giant that is worth speculating on.

Viewer calls taken by Cramer

Honeywell (NYSE:HON): Cramer likes the company and his trust holds a big position in it too.

Renewable Energy Group (NASDAQ:REGI): It has become too hot for an IRA.

Zuora (NYSE:ZUO): Cramer thinks they will deliver a great quarter. It's a great company and Cramer is bullish.


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