Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, June 7.
The upcoming elections in the UK, James Comey’s testimony and the ECB meeting are what the bears are waiting for. “I bet the same people who told you to sell the last time Trump was in trouble; the ones who think this rally is predicated on total Trump policies will tell you to sell again. I’m sure the same people who bolted when Brexit occurred already have one foot out the door. I can promise you there are people who will genuinely flip out if the ECB indeed does remove stimulus,” said Cramer.
This can also lead to the Fed not raising the interest rates. But the bulls are waiting for good stocks to go lower so they can buy them. The bulls see these events as an opportunity to buy high quality stocks. “In their heads, they have fifteen or so stocks that need to be bought even if we get a triad of terrible headlines, and their biggest fear is that saner heads will prevail and therefore you won’t get the kind of buyable pullback that they’ve been praying for,” he added.
Cramer gave his shopping list of 15 stocks to buy when headlines lead to the market going lower.
- In the chip makers group, he would buy Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO) and Lam Research (NASDAQ:LRCX) as they have nothing to do with the interest rate or the policies from Washington. These chip makers are everywhere, be it self-driving cars, graphics or the machines that make these chips.
- To take advantage of growth in cloud computing, Microsoft (NASDAQ:MSFT), Adobe (NASDAQ:ADBE) and Autodesk (NASDAQ:ADSK) are the ones to buy.
- In the consumer goods and services group, the high quality names to buy on lower prices are Johnson & Johnson (NYSE:JNJ), McDonald’s (NYSE:MCD), MasterCard (NYSE:MA) and Visa (NYSE:V) as money from bank stocks will flow into these along with Amazon (NASDAQ:AMZN).
- He recommended buying General Dynamics (NYSE:GD) from the defense group and the medical device maker Intuitive Surgical (NASDAQ:ISRG) as they don’t rely on Washington for growth.
- In other groups, he recommended buying Comcast (NASDAQ:CMCSA) and stocks of video game makers like Activision Blizzard (NASDAQ:ATVI).
Start preparing your list for the next downturn. There are many more stocks and the list is arbitrary.
Headlines generate fear
“This morning we wake up to a starkly negative headline in the Wall Street Journal: ‘Markets Rise in Lockstep, Raising Worries of Reversal’,” said Cramer. The concern is that since stocks, bonds, gold and bitcoin are all rallying together which makes the market vulnerable to sharp reversals. Cramer said the market is vulnerable every day.
It is true that historically stocks and bonds have traded in opposite directions. But Cramer said that low interest rates are good for the companies. “But we’ve never had such an incredible fluidity in fixed income globally, nothing like this. You want to own an Italian 10-year bond at the same rate as a U.S. one? That’s insane if you do. So that money’s coming here, not staying over there. How about a German 10-year where you literally make nothing? That money’s coming here, too,” he added.
Then there’s the movement in gold. Gold goes up whenever things go bad in the market. In the current scenario, gold has been going up on demand from India and China rather than investor fears.
Lastly, Bitcoin has been rallying as it is an untraceable way to move money. “It’s invisible to the taxman so those countries in Europe that raised taxes? They provide a ready market for Bitcoin. It’s the answer for the Chinese because gold’s too easily confiscated. You can’t confiscate Bitcoin,” said Cramer.
Bitcoins are also used to pay hackers with a sharp rise in cyber-attacks. “But the fact that stocks, bonds, gold and Bitcoin are all rising at once likely won’t be the cause of any reversal. You know what I think it is? I think it’s an evergreen headline that generates a lot of fear but, frankly, not much else,” concluded Cramer.
The stock of Intuit is up 25% YTD on top of a 19% gain in 2016. “Look, I’m not complaining. I’ve been a big fan of Intuit and its terrific CEO, Brad Smith, for a long time. But if you believe that the Trump administration can pass some kind of major tax reform bill, something that could simplify the tax code dramatically, then Intuit’s one of the last stocks that should be roaring here. This is an anti-Trump stock. Yet it keeps going higher,” said Cramer.
He dug deeper to find out why the stock is moving higher. The company has three main businesses – Tax producing arm with program like TurboTax; small business ecosystem with software like QuickBooks for streamlining accounting, payroll and payment solutions; and a tax software for professional accountants.
As unemployment is at a historic low, it means more people are filing taxes which means more business for Intuit. This applies to the largest tax preparation firm in the US, H&R Block (NYSE:HRB), as well. While the stock of H&R Block is up YTD, Inuit is leading the competition by embracing the cloud.
“Unlike their top rival, Intuit focuses on online tax filings. They don’t have any of the pesky, expensive brick-and-mortar locations. Consider it the Amazon of tax returns and they’re the No. 1 player in the tax software space, with a massive market share of around 65%,” said Cramer. The software QuickBooks is also in the process of moving to the cloud with a SaaS model. This will produce recurring revenue.
“Not only does this give Intuit a more predictable revenue stream, it also gives them many more opportunities to cross-sell their customers on other products,” said Cramer. Despite the chatter of Trump simplifying the tax code, the stock of Intuit is rallying. “I don’t care whether you see this plan as the triumph of free market economics or a ridiculous giveaway to rich people that could explode the deficit. What matters here is that Trump’s bare-bones tax plan would absolutely make it simpler and easier to file your taxes and a simpler tax code would be very bad news for Intuit, because more people could just do the paperwork themselves without any help from their software,” he added.
The dysfunction in Washington is turning out to be a gift for Intuit. The company is more than just tax preparation as its small businesses arm is growing by transitioning to the cloud. Cramer said he’d be a buyer of Intuit on weakness.
The annual meeting of the American Society of Clinical Oncology is coming to an end, which means some companies emerged as winners and some as losers.
The ASCO conference’s biggest gainer was Loxo Oncology (NASDAQ:LOXO) which rallied 46% from $49 to $71. The company released positive data for two major drugs. The stock has rallied a lot and it should cool off before investors can buy it.
Bluebird Bio (NASDAQ:BLUE) rallied from $75 to $108 on immunotherapy drug data in partnership with Celgene (NASDAQ:CELG). Puma Biotechnology (NYSE:PBYI) rallied and gave back all its gains.
Incyte (NASDAQ:INCY) fell after the conference because expectations got ahead of themselves. “Personally, I’d view this weakness as a chance to do some buying as Incyte has a very deep pipeline with excellent prospects,” said Cramer.
Viewer calls taken by Cramer
Twitter (NYSE:TWTR): They have missed lots of quarters but are turning around now.
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.