The Love For Tech Stocks – Cramer's Mad Money (6/15/17)
Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Thursday, June 15.
While money was flowing out of tech stocks on Thursday, Cramer made the case to buy the tech stocks. “It might be worth remembering why we used to like tech in the first place, and why, despite what you see and hear, maybe you shouldn’t give up on it so easily. Despite the fact that so many people are worried about the valuations of technology stocks, you need to take a look at what else is out there to see why, maybe, tech’s a little more special than you think,” said Cramer.
The reason that tech stocks are good is due to solid earnings organics growth. Consider other leaders like Nike (NYSE:NKE) which went down due to layoffs and competition from Under Armour (NYSE:UA). The sneakers business is now getting crowded.
The market leader Kroger (NYSE:KR) slashed its forecast due to competition. The steel leader Nucor (NYSE:NUE) went down due to weaker than expected guidance. But if one looks at the tech leaders like Alphabet (GOOG, GOOGL), there are not shortfalls. The high growth FANG stocks keep delivering on their earnings.
“Remember that while tech has become a curse word of late, there’s a reason why so many clamor for it and come back to it in the end; earnings, solid, raw, organic earnings, the type you don’t get shortfalls from, the type you get upside surprises from,” concluded Cramer.
The stock of Rent-A-Center is up 50% from its lows. If the move in this troubled stock genuine. Cramer digs deeper to find out. It sells consumer goods like appliances, computers and furniture on a rent-to-own basis, where customers pay off the cost of the merchandise they take home in installments. It was a consistent grower as consumers preferred their installment plans over buying the good outright.
Over the last four years, the stock has fallen 70% from their highs. Is the bounce in the stock sustainable? The company has made lot of changes and has over 3,000 locations in North America. “The company’s founder, Mark Speese, recently returned to his previous role as CEO, there’s an activist firm in there pushing to make changes, and just last week we found out that they’re shaking up the board of directors. Plus, the company’s made some operational changes,” said Cramer.
The company’s numbers had started to decline in 2013 through 2015. Their same-store sales also went down the cliff. Activist Engaged Capital took a stake in the company and urged them to go private to fix issues. Speese was re-instated as CEO. Another activist firm Marcato Capital Management took a stake and they reiterated Engaged Capital’s stance of a board shakeup. Will a sale take place?
The company has announced new strategic changes and did not announce a guidance for 2017. “I think this is way too risky, to buy the stock of a retailer with plummeting same-store sales based on the hope that someone might want to take it private. I can see so much why you’re tempted to speculate here, but for me, Rent-A-Center is way too risky. I say don’t own it, don’t even rent it, there are better fish to fry,” he concluded.
Cramer said that the groceries business has become as bad as retail sector. Kroger declined 19% after slashing their guidance. “We have now officially come to still one more un-investable space in the retail business,” said Cramer.
Kroger is a fantastic company. “But after listening to today’s conference call, one can only conclude that supermarkets are now in one gigantic race to the bottom and no one come out unscathed, perhaps least of all Kroger,” he added.
At their conference call, CFO Michael Schlotman agreed that competition from Wal-Mart (NYSE:WMT) and Amazon (NASDAQ:AMZN) is cut-throat. The margins are getting narrower. The grocery business got highly competitive after players like Costco (NASDAQ:COST), Whole Foods (NASDAQ:WFM), Trader Joe’s and Target (NYSE:TGT) entered the space. The last nail in the coffin was Amazon.
“Now, there’s no way that Kroger is going to cede its turf to everyone. It will compete. It will compete aggressively, which is exactly why, even down here, this stock’s a tough one to own. Right now, though, everyone’s approaching groceries with eyes wide open, and I think, in the end, the only winner is you, the consumer,” said Cramer.
CEO interview – Patterson-UTI Energy (NASDAQ:PTEN)
As the oil prices continue to decline, the stock of Patterson-UTI Energy is off 30% from its highs. Cramer interviewed Chairman Mark Siegel to know his take on the energy sector.
Siegel said that rise in rig counts impact the oil prices but it serves well to oil service companies such as theirs as it means more business. “We’ve had 12 consecutive months of increases in rig count despite oil prices, as you say, being a little bit soft. So the reason is that the people who produce oil in the mid-continent and the Permian Basin, they figured out how to be economic at these kinds of prices. And for us, on-shore, $50 is the new $80,” he added.
Most of their drilling comes from ‘super-spec’ rigs, which are complicated wells that are drilled deep. There are 425 super-spec rigs and 90% of those are being utilized.
“We’re kind of in a Goldilocks position, and the Goldilocks position is between $45 and $55 for oil prices. Quite frankly, it’s not so good for off-shore, it’s not so good for international, but it’s pretty darned good for people who are in the on-shore business in the regions of the mid-continent and the Permian,” said Siegel. He adds that oil remaining in the $45-55 range is fine for them.
Viewer calls taken by Cramer
Ferrari (NYSE:RACE): It’s a great story. Stay long.
MGM Resorts (NYSE:MGM): Don’t buy more until it comes down at $30.
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