How To Play The G20 Summit? - Cramer's Mad Money (12/3/18)

by: SA Editor Mohit Manghnani

Caterpillar is a high-risk, high-reward situation.

Recession-proof stocks still have value.

Don't buy Align Technology.

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, December 3.

The market closed up on Monday thanks to the 90-day truce between the U.S. and China at the G20 summit. There is hope that the 90-day period will bring a better deal between U.S. and China and the market sees that as a positive. The news that China will make significant concessions as a gesture of goodwill will benefit many companies. Cramer gave his take on how to play the G20 meeting.

"If you want to understand what's working in this market, you need to think like a Chinese bureaucrat — not like a portfolio manager; a Chinese bureaucrat who's trying to make President Trump happy. If China wants to show President Trump some good faith, what can they do?" asked Cramer.

China will spend more money on U.S. agriculture products, raising grain prices that will give farmers additional money to spend on supplies. This will have a ripple effect on ag companies like Deere (NYSE:DE) and Cummins (NYSE:CMI). China could also place orders with Caterpillar (NYSE:CAT) and Boeing (NYSE:BA) instead of Airbus (OTCPK:EADSY).

China could also allow financial technology companies like Mastercard (NYSE:MA) and Visa (NYSE:V) to operate without Chinese partners. The semiconductor space could also get a boost and retailers will get some breathing space.

"I'd say the president gave China 90 days to come to the table with substantial changes in the way it does business. Now, the successes will play out case by case, with the best cases being the ones I just mentioned," concluded Cramer.

CEO interview - Groupon (NASDAQ:GRPN)

Groupon reported a mixed last quarter and also announced a partnership with AMC Entertainment (NYSE:AMC). Cramer interviewed CEO Rich Williams to hear what this means for the company.

Williams admitted that he was not happy with the last quarter's performance and that customers know the brand for what they were and not what they are today. "We are moving and what we are now, which is a utility they can use every single day," he added.

Groupon gained popularity on its launch by offering deep discounts to customers. This means that it will be cutting down on emails to consumers and daily deals, and instead offer a consistent set of deals at great prices.

"Consumers can trust when they're hungry, when they're bored, or when they just want something to do on the weekend with their kids," said Williams. Their partnership with AMC is about that change, which Williams refers to as a transformation and not a turnaround.

"We're really excited about being able to partner with AMC to offer that ability for people, when they want to go see a movie and they're thinking of Groupon, to just buy the ticket, and, ultimately, work with AMC over time to make sure that we're providing that kind of pricing specialty that we bring to the table in a way that works for customers and works for them," he added.

People use Groupon 4-5 times a year and Williams thinks there is an opportunity for their platform to be used 4-5 times a week. "And those are the metrics to look at long-term, that we have a lot of customers buying more frequently in a profitable way," he concluded.

Off the charts

Will the Monday rally hold? Cramer went to the charts with help of technician Tim Collins to find the answer.

"Collins thinks you need to be cautious when buying stocks here, because the trade truce failed to clean the murky waters. That said, if you want to understand what's going on with the Chinese and with the U.S. economy, there's one stock that he says you can tell a great deal from, Caterpillar (CAT)," said Cramer.

The stock of Caterpillar thrives in a strong economy with China being its main engine for growth. It serves as a good proxy for U.S.-China trade. The Chaikin Oscillator indicator for the stock has been a good sign of what's coming next.

The three year chart shows that the Oscillator plunged to its lowest reading in November 2015. Going into 2016, it made a higher low as the stock declined. "The uptick in the Chaikin Oscillator foreshadowed a rebound in the stock. Sure enough, CAT gave you a mammoth rally over the next two years. Collins seems to think that we're seeing something similar in terms of bullish potential, with the Chaikin Oscillator bouncing hard off the lows. However, this time we don't have the bullish divergence, because CAT's stock is bouncing along with it," said Cramer.

The daily chart shows a "W" formation with floor of support at $134 and its ceiling of resistance at $142. The stock is a high-risk, high-reward situation.

Stock rotation

As the market showed strength on Monday, there was rotation from recession-proof consumer packaged goods stocks. However, many of the names still have value.

McDonalds (NYSE:MCD) continues to transform itself and its remodeling efforts are paying off. Johnson & Johnson (NYSE:JNJ) has a good pipeline of drugs and Cramer now prefers Coca-Cola (NYSE:KO) over long-time favorite Pepsi (NASDAQ:PEP).

Clorox (NYSE:CLX) is a safe stock that is worth buying on weakness. CVS Health (NYSE:CVS) and Kimberly-Clark (NYSE:KMB) are two other names worth buying as they head lower.

Viewer calls taken by Cramer

First Solar (NASDAQ:FSLR): It's always a question of tariffs vs. no tariffs. It's hard. Don't buy.

Align Technology (NASDAQ:ALGN): 3M wants to be in that market and it will be a tough competitor. Stay away.


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Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.