Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, June 14.
Cramer applauded Fed chief Janet Yellen who raised interest rates by 0.25% despite inflation behind estimates. She had also made a point of not factoring in the ‘Trump effect’ for which the press criticized her in early 2017. “I didn’t hear a soul come out today and mention how right Yellen’s been and how wrong everyone else has been about factoring in the Trump effect. She’s been right as rain about what was going to happen and she gets zero credit whatsoever for engineering this soft path out of the economic emergency room,” said Cramer.
Yellen’s mission has been to become a non-factor for the markets. Since earnings are over, all the markets worry about now is Washington. Be it the Russian scandal or delay in healthcare policy, there is a lot the market is worried about. This made the 25 bps rate increase a non-event as the move was anticipated by the markets. This was seen by the rotation into bank stocks before the Fed meeting.
The scare of a rate hike slowing housing also didn’t take effect as Home Depot (NYSE:HD) did not go down on the rate hike. “The bottom line is that we may want to make Yellen the story. But she ain’t taking the bait. So we get a ho-hum day with lots of middle-of-the-road chatter from Yellen and then we return to our regularly scheduled second-guessing program, as nobody seems to want to say what needs to be said: thank you so much for being predictable and on your game, Madame Fed chief,” concluded Cramer.
CEO interview – H&R Block (NYSE:HRB)
H&R Block reported stellar earnings and the stock rallied 10%. Cramer interviewed CEO Bill Cobb to know more about the quarter.
Cobb said they delivered more than they promised in this quarter as all their initiatives of cost reduction worked. The company has got very aggressive on the design and revenue and they are at 30% EBITDA margins. They have bought one-third of their shares and raised dividend by 66% since he has been CEO.
He also adds that the partnership with AI system, Watson worked well for them. They monitored systems at each of H&R Block’s brick-and-mortar locations that let customers watch the tax return process through Watson’s eyes. “We had bubbles there and we had various call-outs of deductions and credits you could take. What also was a very pleasant surprise was how much our tax pros got excited,” said Cobb.
Watson is a learning technology that will get better with each year. When they make changes for 70,000 workforce, it’s never easy. Both employees and customers have liked Watson. The company also ran a promotion with Hollywood actor Jon Hamm. “He was a great partner to us. We really wanted to differentiate ourselves from TurboTax. They talk about, you know, getting your taxes done. We talked about, we believe we can get your taxes won, which is to find every deduction and credit and maximize your refund,” he added.
Cobb also commented on Trump’s agenda. “I think when you go back to the ’80s when the Reagan administration did the last real tax reform, it took five years. I think the president wants a tax cut, I think the rate cut can happen. I think the rate cut can happen on the corporate side, which would be great for us because our tax rate is in the mid-30s.” When he spoke with the policymakers, he got a feeling that the tax reform might not arrive as swiftly as many voters expected.
Coca-Cola has shown signs of a turnaround as the stock has picked momentum. Cramer thinks the future is bright for them. Since Muhtar Kent became CEO in 2008, the stock has climbed 40% only compared to competitor Pepsi (NYSE:PEP) which has rallied 95%.
“The reason? A lot has to do with the global shift away from soda, which is Coca-Cola’s bread and butter. Carbonated drinks have become the slowest growing beverage category around, whereas PepsiCo has its Frito-Lay and Gatorade business to diversify away from the weakness in sugary sodas,” said Cramer.
Despite efforts to diversify into healthier alternatives and partnering with Monster Beverage, the sales were stagnant. In December, Kent stepped down and James Quincey took over as CEO. At the CAGNY conference, the company laid out a strategic plan for transformation which included a new approach to carbonated drinks business.
They have release 500 products last year and plan to release 500 in 2017 which involves acquiring strong brands and selling them globally. They have also introduce smaller packages and started to change the way it labels nutritional information. They are also spinning off low-margin bottlers it acquired previously.
“On top of that, the company also talked about embracing a leaner, more agile operating model. We didn’t get too many details here yet, but we know it involves reshaping their local business units and doing a better job of hiring executives and managing their performance. Plus, the new Coca-Cola wants to bet more heavily on digital,” said Cramer.
The company trades at 24 times earnings vs. 22 for Pepsi. Cramer thinks the stock can be bought on a pullback.
CEO interview – Box (NYSE:BOX)
The high growth stocks might be out of flavor at the Wall Street, but they are near their highs. The stock of Box is 12% from its recent highs. Cramer interviewed CEO Aaron Levie to know what lies ahead for the company.
Levie mentioned that the company has introduced the Box drive which allows users to access all their files on their desktop. It’s like a traditional storage solution but has all befits of the cloud including security and compliance. “The reason this is significant is so many large enterprises are still investing billions of dollars collectively every year in traditional storage infrastructure that allows them to deliver desktop access to files in their local networks,” he added.
“So this really is going to be, I think, the final nail in the on-premises storage and content management coffin, and we’re very excited to be bringing this to the market,” said Levie. The company now has 74,000 clients, 64% of which are Fortune 500 companies and $117M in revenue in Q1. He added that they are seeing growth in unexpected places due to their systems being sophisticated.
Viewer calls taken by Cramer
Wix (NASDAQ:WIX): The long-term view is great and it’s a smart company. Hold on to it and buy more when it comes down.
Post Holdings (NYSE:POST): Cramer said Pepsi is a better bet.
Mattel (NASDAQ:MAT): Hasbro (NASDAQ:HAS) is a better growth stock.
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