Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Tuesday, September 12.
The age-old strategy of buy low and sell high is still valid. “Many stocks do get cheaper when they go lower. I think this commonsense wisdom often gets ignored when we’re analyzing stocks on a day-to-day basis,” said Cramer.
Case in point is Apple (NASDAQ:AAPL) which released its new products on the iPhone’s 10th anniversary. The stock went down after the event. “I haven’t heard anyone say, ‘Nah, I just bought the iPhone 7.’ I’m either hearing, ‘Yes, I’ll upgrade,’ or ‘I hope someone will buy it for me.’ That’s incredible. It’s the most beloved device I can remember,” said Cramer.
The stock of Apple went down from $131 in May 2015 to $90 in May 2016. That was a good opportunity to buy as the stock hit a high of $164 recently. The same goes for United Technologies (NYSE:UTX) which bought Rockwell Collins (NYSE:COL). The market thinks that United has overpaid and the stock is down. Cramer reminded viewers that they bought Goodrich six years ago and the market had a similar reaction.
“Is it wrong to ask if history could be repeating itself? It’s gotten cheaper. You might think that’s so self-evident it’s not even worth mentioning, but because of the decline, investors are running away from the stock, not towards it, as if United Technologies has somehow gotten more expensive. It hasn’t, and I think we’ll look back on this as a great buying opportunity,” added Cramer.
The same theory applies to Caterpillar (NYSE:CAT) which has risen 50% in the last twelve months and Marriott Vacations (NYSE:VAC) which went down to $91 on the fears that Airbnb (Private:AIRB) will eat into its share. However, not every stock that goes down gets cheaper. Macy’s (NYSE:M) for instance went down as it was losing value. At $22, the weakness is baked in the price.
Buy low, sell high is a great investment strategy for strong companies that go lower.
The tax reforms and repatriation of overseas cash will benefit companies greatly but Cramer thinks it’s not going to happen soon. Lower taxes and overseas cash will generate domestic investment and expand business. “However, as much as I love tax reform, I’m a realist. Earlier this year, at the time of the inauguration, I could not have been more excited about the president’s economic agenda. But not anymore. I know better now,” said Cramer.
The healthcare reform debacle and the border tax falling between the cracks makes Cramer believe that Congress won’t get the tax reform soon. “Then this morning the Treasury secretary said he wants to change the taxation of pass-throughs, a type of business that could benefit from tax reform. The administration also wants to eliminate deductions for state and local income tax in order to pay for the plan,” said Cramer.
“Any kind of comprehensive reform, whether we’re talking health care or immigration or taxes, always takes forever, always ends up being unpopular and usually ends up failing,” he added. Cramer suggests that for infrastructure building, the government should issue bonds instead of going for alternative sources that are complex. “We’ll buy them. We’ll do it because we’re patriotic and we’re practical,” he said.
“The way the White House is doing it right now, pretty much insures failure. The best is the enemy of the good. Memo to the GOP: stop trying to make tax reform perfect. Just get something passed. Let’s get this done,” concluded Cramer.
Off the charts
Many oil refiners are shut down due to the hurricane. This can turn out to be beneficial for the refiners in Cramer’s opinion. When the refiners are shut and the oil price remains the same with gas prices going up, they make extra profit due to the increased margin.
“That means when a hurricane like Harvey floods the coast of Texas and Louisiana, where so many refineries are located, a lot of capacity gets shut down, and that ends up being a huge boon for refiners who can take advantage of it,” said Cramer. He went to the charts with the help of technician Bob Lang to know where the refiners are headed – Andeavor (NYSE:ANDV), Valero (NYSE:VLO) and HollyFrontier (NYSE:HFC).
The stock of Andeavor bottomed in April and since then has made a series of higher highs and higher lows. The Chaikin Money Flow Oscillator is strong even when the stock sold off which means that strong investors are buying the stock. Lang thinks it can hit $110. “My favorite thing about Andeavor, though, is that none of its refineries were in Harvey’s path. They’re benefiting from the shutdowns along the Gulf Coast more than anybody else due to rising margins and market share,” said Cramer.
Valero also shut down five of its Texas refineries but the rest of its locations are making money due to rising margins. The MACD indicator in the daily chart made a bullish crossover at the end of August. Lang thinks this stock can go from $70 to $77-80.
HollyFrontier rallied in August and broke out above $33 last Tuesday. Institutional investors have been trading the stock in huge volumes. Lang thinks it will touch $40.
“The charts, as interpreted by Bob Lang, suggest that these three big refiners have more room to run, and I can tell you the fundamentals agree,” concluded Cramer.
CEO interview – Ventas (NYSE:VTR)
The stock of Ventas has been flat in the last 12 months. Cramer interviewed CEO Debra Cafaro to find out what lies ahead for the company and their new investment university facilities.
Cafaro said their healthcare REIT made new investments in the area of life sciences. “We’ve invested or committed about $2B in capital so far. And it’s a university-based life science business. So it’s an incredibly needed business because, as we know, there’s so many Americans with chronic illness, so much research to be done, and universities, even highly rated ones; and most of our customers are A-rated or better, want to leverage their capital because they’re capital-constrained, and so we can develop and own these buildings for them,” she added.
“The universities are the engines of economic development in these sub-markets, they’re magnets for private capital who want an employed workforce, and so we bought a great portfolio. It’s at Yale, at Duke, at Brown, at WashU, at UPenn Medicine and we are developing these hubs of research and innovation with and for these universities to help them grow by using our capital,” said Cafaro.
There are concerns about their senior properties as there is a demand mismatch. She called it a part of the normal cycle and thinks the demand will be absorbed quickly. The numbers of such facilities being built today are much less compared to two years ago.
CEO interview – New Relic (NYSE:NEWR)
The stock of New Relic is up 75% in 2017. Cramer interviewed CEO Lew Cirne to hear what lies ahead. New Relic has high-profile clients like BAMTech, Major League Baseball’s digital arm and Jet.com. They help companies keep their digital properties running using a dashboard system which gives them real-time insights into their network.
“If you think about it for Jet or for MLB, there are these moments of truth where you must shine. It could be the World Series or it could be Black Friday for Jet.com. At that moment, you need to know exactly what’s going on in real time. Are people able to purchase the items online? What are they browsing? If it’s slow, why is it slow? How do I make it faster immediately?” said Cirne.
They compete with the likes of Cisco. Cirne said that New Relic has an advantage as they are a 100% cloud-based company. “We’re a 100 percent SAAS-delivered company, and that’s where the future is. And so our competitor has an on-premise bias and they were bought by a company with an even stronger on-premise bias, so we don’t have any problems competing with a company that has historically been in the networking space,” he concluded.
Viewer calls taken by Cramer
Universal Insurance (NYSEMKT:UVE): It’s important to know the exposure these insurance companies have towards the storms to know if it’s a buy or not.
Teva Pharmaceutical (NYSE:TEVA): Cramer hears good things about them. He recommended buying Allergan (NYSE:AGN) which owns 10% in Teva.
Nucor (NYSE:NUE): Cramer’s trust bought the stock because it’s the best steel company. It’s down on fears that there will be no tariffs on China.
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