Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, August 16.
After Charlottesville, the business council was dissolved, and yet, the market did not fall. “What matters is that sales and profits have been excellent this year, particularly for everything but select retailers and the oil and gas industry. On top of that, low interest rates and slow inflation have combined to make those sales and profits worth more than most investors expected,” said Cramer.
He added that the new administration’s inaction has allowed businesses to make money. “The business world is made up of cycles. There are all sorts of cycles. There’s the housing cycle, the consumer spend cycle, the auto cycle, the tech spend cycle, the non-residential construction cycle, the truck build cycle, the oil and gas cycle, the mineral cycle, the aircraft cycle,” the Mad Money host noted.
In the housing sector, there’s more demand for housing. “Think of everything that goes into your house. Housing is 10% part of the economy, but because of all of the accoutrements both outside and inside, plus all of the financial and legal ramifications of buying a home, it punches way above its weight,” Cramer said. The demand in aerospace and tech is also rising.
“Remember, if something’s a cycle, that means it booms and busts. If it’s secular, that means a sustained boom.” The growth trends in cell phones, the internet of things and artificial intelligence are real. Hence, the dissolution of Trump’s manufacturing council doesn’t mean much for these trends. The weak US dollar also helps companies doing business internationally.
Cramer concluded by saying that the market is much more than just Washington.
CEO interview – Valeant Pharmaceuticals (NYSE:VRX)
The stock of Valeant Pharmaceuticals has fallen to $9 and found a bottom, and it is trading around $14 currently. Cramer interviewed CEO Joe Papa to know what lies ahead for the troubled drugmaker.
“I will say, first and foremost, it’s been a challenging 15 months, to be clear. But we’ve made great progress as a team,” said Papa. The company has sold lot of non-core assets and changed its focus towards R&D and reducing debt. “In the time period since the first quarter of 2016 to now, we paid back $500M more toward $4.8B of debt reduction in less than a year or so ahead of what we said,” the CEO added.
Valeant will be making more divestitures to fix its balance sheet. “I believe the new products we have are going to generate the returns for our shareholders that we need to generate. We feel really good about what we’re doing. We have zero debt maturities between now and 2020, so that gives you a real chance to invest in the business,” Papa said.
The company’s focus is to provide quality healthcare for patients all over the world.
The retail environment is under pressure, with Dick’s Sporting Goods (NYSE:DKS) falling after earnings and Home Depot (NYSE:HD) stock not rising despite good earnings. The fall in the group is due to Amazon (NASDAQ:AMZN). Cramer has no issues recommending Amazon, but there are two other stocks worth looking at in the retail group – Etsy (NASDAQ:ETSY) and Shopify (NYSE:SHOP).
Etsy has not done much since its IPO, but bounced 32% in 2017. Shopify, on the other hand, has grown 120% since the IPO. Both these companies are different, but Etsy is the cheaper one while Shopify has better growth prospects. Etsy’s revenue growth was 19%, compared to Shopify’s 75%, but the former is profitable. Based on sales, Etsy just trades at 3.6 times, compared to 10.6 for Shopify. Etsy has a better risk-reward.
Apart from this, the retailers that can beat Amazon are TJX Companies (NYSE:TJX), Target (NYSE:TGT) and Urban Outfitters (NASDAQ:URBN). TJX delivered positive same-store sales growth and is opening new stores at a time not conducive for retail. Urban Outfitters has good profit growth and the right fashion trends, while Target is returning to growth and offers a 4.4% dividend at the same time.
CEO interview – Kirkland Lake Gold (NYSE:KL)
The stock of Kirkland Lake Gold started trading on NYSE on Wednesday. Cramer interviewed CEO Tony Makuch to find out what lies ahead for the Canada-based gold miner.
Kirkland has two operating mines – Canada and Australia – with proven reserves of 2M and 1M ounces, respectively. Its cost of production is as low as $250 per oz, which gives the company a significant edge over others. Both Canada and Australia are good places to mine geopolitically as well.
With rising global tensions, Makuch believes gold prices will rise, and hence the company is investing more money in its mines.
Viewer calls taken by Cramer
Magellan Midstream Partners (NYSE:MMP): The entire group is under pressure.
Take-Two Interactive Software (NASDAQ:TTWO): Cramer is a fan. There is no reason not to buy the stock.
Kratos Defense & Security Solutions (NASDAQ:KTOS): It’s a good defense stock that will go higher.
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