Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, January 17.
Cramer said that a part of Trump’s agenda is working. Lower tax rates, deregulation, and an already booming global economy will boost the US economy further. While the skeptics would believe that tax cuts are for the shareholders and will flow to the rich as dividends, Apple’s (NASDAQ:AAPL) plan proves otherwise.
“Apple, using some of the gigantic $252B cash hoard that it has overseas, announced Wednesday what I think is a modern-day Marshall Plan for the U.S. economy. Apple committed to directly investing $350B into the United States over the next five years, including $38B in repatriation taxes,” said Cramer. Apart from that, other companies have been paying bonuses to employees.
Cramer conversed with Apple CEO Tim Cook over the phone where Cook emphasized being a leading corporate citizen and creating jobs. “He said that ‘While some of these efforts were indeed in the works, Washington enabled most of this job-creating plan to occur by changing the tax code to allow companies to return capital to all stakeholders,’ a series of reforms that Tim has championed for quite a long time,” said Cramer. Of $350B, $55B will be injected into the economy in 2018.
Apple also plans to create 20,000 jobs by hiring at its existing campus and the new campus that it plans to build. “Frankly, I think Apple’s view of how to generate jobs, how to create wealth away from the shareholder base, is probably a heck of a lot better than anything the government could ever do,” said Cramer.
He thinks there will be a multiplier effect of this. “Whatever you think of the president, part of his agenda is working. If Apple turns out to be the tip of the iceberg, then this already strong economy could get even stronger. And frankly, I don’t know about you, but I’d rather have Tim Cook deciding what to do with this cash than anyone in the capital,” he concluded
The major banks have reported earnings and Cramer reviewed each one to find out which one is a buy. The banks took a one-time hefty charge due to changes in tax laws. “I know it was pure accounting gimmickry, but I worried that it might freak out investors. Turns out there was no need to worry,” said Cramer.
JP Morgan’s (NYSE:JPM) earnings were better than analyst expectations. Despite flattening yield curve, the bank’s net interest margin increased by 5 bps. They got a big windfall from tax relief and it trades at 2.1 times tangible book value.
Bank of America (NYSE:BAC) is most levered to interest rates and saw its net interest margin increase by 3 bps. The stock trades at 1.85 times its book value.
Citigroup’s (NYSE:C) earnings were not as strong as others. Their net interest margin fell by 9 bps but their total loans were up 5%. It trades at 1.28 times its book value. Cramer called it the best value bank.
Wells Fargo (NYSE:WFC) is still trying to recover from the scandal and its net interest margin dropped by 2 bps. It still trades at 2 times its book value.
Lastly, Goldman Sachs (NYSE:GS) saw their investment banking business go up while trading business go down. It is not a big beneficiary of tax cuts and hence it is not Cramer’s favorite stocks.
“Now, J.P. Morgan and Citi, and Bank of America all said that their approach to dividends and buybacks won’t change because of the tax bill. But all four of these companies have been voracious buyers of their own stock, especially Bank of America and Wells Fargo, and if the Fed gives them permission to even increase their repurchase programs, I think they’ll do just that,” concluded Cramer.
Chairman interview – Tellurian (NASDAQ:TELL)
Cramer interviewed Charif Souki, the co-founder and chairman of Tellurian. They are aiming to build a low-cost natural gas business.
Souki said that natural gas industry needs a big infusion to keep drilling. “We have so much natural gas in this country. Just the amount of gas that is already behind pipe, or that is going to be found because of oil production at $60 a barrel, is going to require over $150B of infrastructure investment over the next five years.” he added.
Tellurian is taking advantage of the industry’s need for low-cost liquefied natural gas. They are making export terminals for LNG, investing in pipelines and funding natural gas production. The construction of their first US based terminal will begin in 2019.
“We had very low prices for three years and therefore all the producers are now not very financially stable so they cannot invest. And the U.S. is a savior. However, we don’t have the infrastructure to take it to the water. We’ve been geared to take it from the water to the rest of the country, and now we have to be able to get it from where it’s produced to the water, and that infrastructure doesn’t exist,” said Souki.
Tellurian has the cheapest natural gas in the world. “We want to have the flexibility to choose the cheapest all the time, whether we have to drill for it or simply source it from the Apache likes,” he added.
Despite the rising oil prices, Washington’s view of their business has not changed. “The Trump administration is prouder of us than the Obama administration was, so one brags about us and the other one used to hide us, but they were both very supportive,” he concluded.
CEO interview – Splunk (NASDAQ:SPLK)
The stock of data analytics provider Splunk gained 62% in 2017. Cramer interviewed CEO Doug Merritt to know what lies ahead.
Merritt said that data continues to grow and is powering businesses today. Machine data is one of the biggest segments in big data and Splunk is leading the space in both security and analytics.
“I meet with hundreds of customers every single year and they’re all wrestling with that challenge of big data’s growing like crazy and how, ultimately, to get insights. But that starts, in the very beginning, with what data do we even look for? How do I find big data? What are sources of big data? Then, how do I correlate these colliding streams that are hard to make sense from so I can get those insights and take action,” said Merritt.
The machine data segment is growing 50 times faster than traditional business data. Merritt adds that Splunk has the scale to handle petabytes of machine data every day and the ease of use to allow multiple departments to mine that data. Big companies like Mercedes and Carnival Cruise line use Splunk’s services to manage data.
Viewer calls taken by Cramer
AT&T (NYSE:T): It’s good to buy as it yields 5.4%.
Juniper Networks (NYSE:JNPR): Cramer prefers Cisco (NASDAQ:CSCO) as one not only get the service provider but also great software.
Entercom Communications (NYSE:ETM): They have a good yield and scale to grow.
CME Group (NASDAQ:CME): It’s a well-managed company and Cramer called it a winner. It’s a buy.
PayPal (NASDAQ:PYPL): Cramer said the stock can hit $100.
Walker & Dunlop (NYSE:WD): Cramer thinks CBRE Group (NYSE:CBG) is the stock to buy when it comes to commercial real estate.
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Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.