Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, November 6.
Whichever way the midterm elections go, there are ways to make money. Investors made bets on Tuesday based on all possible scenarios and Cramer gave his picks too.
Historically, the market loves gridlock. If the Democratic Party is expected to gain control of the House of Representatives, with the GOP maintaining a slim majority in the Senate, it would result in a gridlock which could be bad for President Trump's agenda, but can actually be good for stocks. "This gridlock scenario results in a dramatically slower economy. That's terrific for the highest-growth stocks that can keep putting up terrific numbers even during a slowdown. Think Amazon (NASDAQ:AMZN), Alphabet (GOOG, GOOGL), the cloud plays, the cybersecurity stocks, and many of the semiconductor names like Broadcom (NASDAQ:AVGO) and Qualcomm (NASDAQ:QCOM), which are tied to the rollout of 5G wireless technology, not the broader economy," said Cramer.
A Democratic win could be good for biotech as well and stocks like Humana (NYSE:HUM), CVS Health (NYSE:CVS) and Cigna (NYSE:CI) can be bought. Health insurers like UnitedHealth (NYSE:UNH) and HCA (NYSE:HCA) will do well in any scenario. The retail stocks could suffer as Trump's tax cuts could be jeopardized but tariffs and interest rates continue to rise. "I'd be very careful here. I bet many hedge funds would like to go long Amazon, which has been down, down, down, and go short all the retailers, which have been up, up, up," said Cramer.
If Republicans maintain control of Congress, buy defense stocks like Northrop Grumman (NYSE:NOC), Raytheon (NYSE:RTN), Lockheed Martin (NYSE:LMT) and Boeing (NYSE:BA). "While both parties love shelling out money for military hardware, the Republicans love it even more, so if they can hold both houses of Congress, I expect a roaring bull market in the defense stocks," he added.
Democrats will not have enough votes to stop a trade war with China or change the Fed's interest rate plans. If there is a scenario where investors on the sidelines come to buy, apply the strategy in reverse. "You take the stocks that I have said do well in a Democratic sweep or even a one-house win, and you sell them and you sell them hard. You can keep the Republican stocks, but don't overstay your welcome," said Cramer.
"Unfortunately, the biggest issues for this market won't be decided at the polls today, because they're the purview of the president and the Federal Reserve, not of you, the midterm voter," he concluded.
CEO interview - Nucor (NYSE:NUE)
The stock of Nucor is down 8% since President Trump declared tariffs on steel. Cramer interviewed CEO John Ferriola to find out his take on tariffs and the US steel industry in general.
"We hear a lot of talk about the tariffs and, certainly, the tariffs are playing a role in the performance that the steel industry, and Nucor in particular, is having this year. But the real driver for the performance of the industry and Nucor is the economy, and the economy remains strong," said Ferriola. Also, tariffs are working as they see steel imports declining and domestic steel demand rising.
He added that Nucor is being driven by the strength of the economy and demand and not tariffs. "The economy is being driven by the tax reform, by deregulation, by a very strong energy market, and all of these things are factoring into the fact that demand is good. The economy drives demand in steel. When you look at our demand in the industry this year, it's up about 2% year over year," said Ferriola.
Nucor is about to have the best year in history with 23 of their 24 end markets being stable or increasing heading in Q4 and 1H 2019. Commenting on the midterm elections affecting Nucor, he said, "Unless there's a major change in tax policy, a major change in deregulation and we see a sudden and unexpected drop in oil, I think it's going to remain strong." Seasonality plays a greater role in their earnings.
Off the charts
Apple (NASDAQ:AAPL) declined after earnings and Cramer wanted to get a technical view of where it's headed. With the help of technician Carolyn Boroden, he went over the charts of Apple.
Boroden is "cautiously optimistic" about the near-term future of Apple. She looks for symmetry as the stocks decline and rally in patterns. She ran the stock's past swings through Fibonacci ratios to find key support levels.
"When you do this with Apple, you find two zones. There's a potential floor of support running from $196 to $198, and another one lower running from $186 to $192," said Cramer. The weekly chart of Apple shows $45 declines in 2013 and 2015. The current decline is $35 and she thinks it can get there soon.
"Apple has a powerful floor of support here. If that floor holds, Boroden believes the stock will quickly find its footing and go right back to rallying. As long as we don't violate the recent lows, she thinks Apple can potentially zoom to new highs; she thinks it could go to the $243 area," said Cramer. If the stock does not hold the floor of support, then the theory does not apply.
"The bottom line? The charts, as interpreted by Carolyn Boroden, suggest that Apple might not have much more downside before it bottoms, and that, likely, it bottoms sometime this week and then starts climbing again," concluded Cramer. He reiterated not to trade Apple but to own it. This could be a good entry point.
CEO interview - RingCentral (NYSE:RNG)
The stock of Internet telephony company RingCentral rallied after a good quarter and raised guidance report. Cramer interviewed CEO Vlad Shmunis to hear more about their performance.
Shmunis said that the secret of their performance is their product, that allows companies to communicate the way they want to, be it video, voice or text. Their software runs on phones, tablets, PCs and on dedicated phone hardware. As they are in the cloud, communication can be built into any workflow.
Commenting on competitor Broadsoft, which was acquired by Cisco, Shmunis said, "We're winning business from them all the time. The No. 1 provider or company that we replace happens to be Cisco, followed by Avaya. All of the legacy providers are in secular decline. Cloud is doing well and we are doing 50% better than cloud on average, so we are happy to be there."
Viewer calls taken by Cramer
El Pollo Loco (NASDAQ:LOCO): It's a good company.
Esperion Therapeutics (NASDAQ:ESPR): It's a high risk/high reward situation.
GoPro (NASDAQ:GPRO): While their inventory is leaner, Cramer is still not convinced it's a buy.
MongoDB (NASDAQ:MDB): It's a good company and buying it at current level is not a bad idea. Those who want to book profits partially, should do it too as it has run up.
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