Moderna is a speculative buy.
Trading volume is like a polygraph for stocks.
Healthcare sector is recession proof.
Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday, December 10.
Markets continued their downward trend with the Dow at one point losing 2.08%, S&P 500 2.06% and Nasdaq 1.19%, but recovered later in the afternoon with the Dow closing up 0.14%, S&P 500 up 0.18% and Nasdaq up 1.05%, led by recovery in Apple's (NASDAQ:AAPL) stock.
Shares of Apple hit a low of $163.33 after Qualcomm (NASDAQ:QCOM) won a preliminary iPhone ban in China and with Citi seeing Apple's price at $125. They rebounded to $168, after a CNBC Halftime report panelist said that Apple's shares had hit an interesting level to buy, signaling that insecure and under-confident traders will take a cue from anything.
Apple is a perfect metaphor for this movement. It hit a high of $233 ($1T market cap) on Oct 3 and currently shares are trading at $168 ($775M market cap). The Fed announced a series of rate hikes on Oct 3, signaling the peak of the entire business cycle and then there was the U.S.-China trade war. Apple even stopped breaking down the quarterly sales of its individual products, signaling that iPhone sales are slowing.
Powell expected four interest rates hikes considering the economy was good, but the economy has turned negative as housing continues to fall, quarterly sales down, commercial real estate low, loans losses for regional banks continue to climb, non-farm payroll missing estimate. Cramer believes Powell should hold on to the rate hike and see what happens.
The trade war issue has many faces with each side saying something new every day. All this has led to confusion among traders.
Investors will freak out if Powell doesn't hike rates in December, as it will signal something went wrong with the economy, causing the market to panic.
"Right now, Apple, the stock, sells at a dramatic discount to the average stock in the S&P 500. Analyst after analyst has slashed their price targets. That's because, just like with the rest of the market, it's hard for anyone to have conviction when there's so much negativity," concluded Cramer.
CEO interview - Splunk (NASDAQ:SPLK)
Splunk was one of the worst performers in October as investors rushed to sell, as there was news about a possible slowdown in the cloud-related sector even though there was no data to back it up. The company had an amazing quarter with 40% revenue growth and has managed to bounce back. Cramer interviewed CEO Doug Merritt to find out what lies ahead.
Merritt stated that the company mission continues to be to focus on the success of their customers. The company helps its corporate customers including Coca-Cola, Nordstrom, and Groupon gather real-time data related to their businesses to smooth operations, boost security and gain eye-opening insights into consumer patterns.
"The data analytics business doesn't stop at the keyboard. You can now talk to Splunk through Alexa, Siri or other natural-language frameworks and have Splunk respond back to you. It the power of Splunk to everybody within the organization," said Merritt.
The company has announced new business lines. "We've got a whole next-gen mobile platform that has an augmented reality framework on top, so that customers like University of Connecticut, in their aquaponics lab, where they grow fish, can now use their mobile devices and walk through the lab to check things like UV light and pH balance," added Merritt. Other customers like Carnival use Splunk extensively to serve to every aspect of the guest both on and off the ship.
There are plenty of growth opportunities in application development, IT operations and security and there are many use cases to expand both the breadth and depth of those areas.
Know Your IPO
Moderna (NASDAQ:MRNA), a biotech company, plummeted 20% on its opening day last Friday, as the market had crashed. If you are worried about economic slowdown, this is a biotech which could thrive in recession, as it has nothing to do with GDP growth or global commerce.
Moderna is an early stage biotech company with a revolutionary concept of creating a whole new category of medicine based on messenger RNA. It helps in correcting genetic disease by correcting cells by just giving instructions.
It has 21 development programs, 10 of which are in the early stages of clinical trials. Most of the advanced clinical trials are in phase II. What sets Moderna apart from others is that it's about delivery, technology and manufacturers. Moderna is also working on manufacturing tech that will allow it to mass-produce its treatments once they get federal approval, though that is still years away.
The company would make money from milestone payments from mergers and partnerships from Merck (NYSE:MRK), AstraZeneca (NYSE:AZN) and Vertex Pharma (NASDAQ:VRTX). The larger companies are giving them funding to develop various drugs to harness the messenger RNA technology.
"The company is spending a fortune on R&D, but the corporate investments have allowed the company to maintain a clean balance sheet, which now boasts $1.8 billion in cash to spare thanks to the IPO," Cramer said.
"Early-stage biotechs like this one don't trade on the numbers, they trade on belief. In about a month, Moderna's quiet period ends, and the analysts will start rolling out their coverage. If they tell a bullish story, and I think they probably will, this stock can rally," he added.
The stock is not for retirement, as it's a speculative stock. It can probably go lower, but currently it's at a good entry point.
CEO interview - Tech Data (NASDAQ:TECD)
Tech Data reported excellent 3Q19 earnings. Cramer interviewed CEO Rich Hume to hear about the company's outlook.
Hume stated that this year has been a strong one for the company as there is strength across the board in 2018 with 20% growth in all the three regions, with all big products having good growth. The company has provided guidance of 7% growth for 4Q19. The company vendors include Apple, HP, and Cisco Systems.
Tech Data had made big acquisition and has started reaping benefits of cash flow gains. They generated a strong cash flow, paid debt before maturity date and have a $200M share buyback in October. Hume said the company's debt to equity ratio is where he likes it to be and they have enough cash to fund acquisitions, stocks buybacks and invest in organic growth.
CEO Rich stated that "Hybrid cloud is the mode of the future."
Market volume and the volatility
After today's roller-coaster session, the market has broken in both directions because averages opened too high.
FedEx (NYSE:FDX) was slammed 4.2% on Monday after BAML downgraded the stock on a surprising change to its Express CEO, but the shares traded were less than 200,000 while ideally it should have had a volume of 2M shares. The lack of volume tells you everything about stock. Prices are often irrational and driven by fast trading ETFs.
The volume is like a polygraph for stocks: high volumes means truth, while low volumes means the market is probably lying. "A market like this is inherently treacherous. While individual buyers of common stock made an appearance this afternoon as the averages rebounded, they didn't come out in very large numbers. Individual buyers have been abused and discouraged and need the protection of the SEC because I think they're being fleeced and driven out of the market," said Cramer.
He doesn't expect anything to change until a thorough investigation by the SEC about why is this happening takes place.
Viewer calls taken by Cramer
Which is the best sector to buy?: Healthcare works. Healthcare is recession resistant and there are a lot of great drug companies and other stocks like McDonald's (NYSE:MCD).
Gilead Sciences (NASDAQ:GILD): The new CEO Dan O'Day is terrific. The stock has done going down, but Cramer won't sell it.
Array BioPharma (NASDAQ:ARRY): "The company has discovered a drug and I like it." It's speculative and Cramer recommended holding on to it but not buying more.
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