Demand And Supply Of Stocks – Cramer's Mad Money (10/12/17)
Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, October 12.
Stock market is just like any other market which trades on demand and supply. “Like any other market, when there’s too much demand, stocks go higher, and when there’s too much supply stocks go lower. Today, you could see those supply and demand dynamics in action and that led to some very difficult trading,” said Cramer.
In terms of demand, tech was the clear winner with semiconductors, gaming, e-commerce and social media rising as investors were hungry for these. The transportation stocks like rails, airlines and freight forwarders were in demand too.
In terms of supply, retail stocks continue to go lower as investors are up for selling them. Be it the lack of growth or competition from Amazon (NASDAQ:AMZN), the retail stocks can’t seem to find a bottom. The same applies to energy stocks that are dependent on higher oil prices. As crude is stuck in $50 range, energy stocks are abundant in supply.
Surprisingly, there was supply in bank stocks as well. After JPMorgan (NYSE:JPM) beat earnings, the stock did not go higher on credit concerns. Cramer said he’d wait for the weakness to get over until next week to buy these stocks.
“Don’t forget that this market is fickle. Sure, oil and retail have been a continual disappointment, but supply does come out in tech and transports. As for the banks? They’ve run a huge amount. It looks like they’re now going to give you a chance to scale into them at a lower level. My advice: never buy on day one of a big sell-off or day two, either, which would be Friday. There will most definitely be more supply behind it,” he concluded.
CEO interview – Domino’s Pizza (NYSE:DPZ)
The stock of Domino’s closed down 3.9% despite good same-store sales and earnings. Cramer interviewed CEO Patrick Doyle to know more about the quarter. The company’s stock is up 26% for the year.
Doyle said the earnings report seemed to have disappointed investors despite strong domestic same-store sales growth, which is a true litmus test for the retail industry. “I’ll take 8.5% all day long and we have near 40% cumulative growth over the last four years,” said Doyle. “The international business is back in that range of 3-6% that we say you should expect. Store growth was strong; flow through on earnings was terrific. So we feel great about the quarter. We’re not going to spend time worrying about short-term moves,” he added.
Doyle mentioned that the technology they invested in four years ago has started to show fruit. “We’ve been talking about natural voice as how we think people are going to interact with technology for a while. We started investing in it three or four years ago. Alexa, now, of our AnyWare suite of products, has been really the strongest for us in terms of total number of orders. That keeps growing. Google Home’s doing well. We’re looking at other ways we can use that. So that’s important from an ordering perspective,” he added.
They have also partnered with Ford (NYSE:F) to test self-driving cars for pizza delivery. This project is a continuation of Domino’s tech-enabled delivery experiments which has included drone delivery earlier. “We’re figuring out new ways to deliver to people. It’s going to take some time, but we’re excited about it,” he said.
Domino’s has $250M left of the current share buybacks.
LKQ Corp. (NASDAQ:LKQ)
Many companies have been winning quietly and missing the market radar. LKQ is one such company. It’s providing alternative parts to repair and accessorize automobiles and other vehicles, and the stock is up 33% from lows in April.
The company had disappointing quarters and its CEO retired. After that, they have been building their business strongly and are seeing the results of 200 acquisitions since 1998 starting to pay off. After purchasing many part-suppliers in Europe, LQK is ripe to take advantage of the improvement in European economy. It is the continent’s largest auto-parts supplier and has the scale to negotiate with suppliers.
They delivered two strong quarters of earnings consecutively. “LKQ is exactly the kind of quiet, unheralded, under-the-radar winner that makes this market so powerful. I think it deserves more credit. That’s why I’m sponsoring it and why I’m pounding the table,” said Cramer. It trades at 17 times earnings. “Given the strength of the numbers and the stock’s cheapness, I bet the completely anonymous LKQ has a lot more room to run. Sure, I’d like it on a pullback. That’ll give you a chance to get to know the company, not just the initials, before you take the plunge,” he concluded.
Procter & Gamble (NYSE:PG)
PG may have won the proxy vote, but their struggle is far from over. “Nearly half the shareholders who voted agreed with Peltz that Procter is too insular and not innovative enough when it comes to developing smaller new brands into larger established ones. That’s what Peltz was pushing for in a nutshell,” said Cramer. This is enough to bring about a change.
The consumer packaged goods stocks are weak already and this should be in PG’s interests to innovate. Estee Lauder (NYSE:EL), Clorox (NYSE:CLX) and Unilever (NYSE:UL) are the only three consumer packaged goods stocks that have shown strength in this market.
“What do those three winners have in common? They’re all run by executives who used to work at Procter & Gamble, all of them born elsewhere, all of them with tremendous command of multiple international markets,” said Cramer. Estee Lauder’s CEO Fabrizio Freda, Clorox’s CEO Benno Dorer and Unilever’s CEO Paul Polman were all part for PG before for many years and have innovated.
“So let’s see if Procter & Gamble CEO David Taylor heeds Peltz’s call to bring in more outsiders. Let’s see if the board understands what that vote really meant. If not, guess what? The stocks of Clorox, Estee Lauder and Unilever remain the better buys because of tremendous innovation, fabulous international growth and a lot of organic new products,” concluded Cramer.
Viewer calls taken by Cramer
Flexion Therapeutics (NASDAQ:FLXN): It’s a speculative buy. Cramer advised putting little money as the company is not profitable.
BlackHawk Network (NASDAQ:HAWK): Don’t buy. Cramer is tired of this stock being in a good-bad situation.
Carrizo Oil (NASDAQ:CRZO): The stock at $12-14 was an opportunity. This is the time to book profits.
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