Game Plan For The Week – Cramer's Mad Money (10/20/17)
Game Plan For The Week – Cramer's Mad Money (10/20/17)
Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Friday, October 20.
The big earnings week is on the way. Cramer said the earnings better be good so the strength in stocks continue. “I always feel emboldened when we get a real doozy of an earnings report like we did from General Electric (NYSE:GE) and the stock in question comes out the other side unscathed,” said Cramer. He will keep an eye on the earnings and the chatter about the tax reform. With that, he discussed his game plan for the week.
Arconic (NYSE:ARNC) and Kimberly-Clark (NYSE:KMB) report earnings on Monday. Arconic still doesn’t have a permanent CEO. “If we got one or it put itself up for sale, either way, I think Arconic’s stock can fly. But, what the heck, it’s time something happened,” said Cramer. On the other hand, Kimberly-Clark can have weak earnings after its peers reported not so great quarters.
Industrial stocks earnings will show the strength of the sector. Cramer will be watching numbers from General Motors (NYSE:GM), United Technologies (NYSE:UTX), Caterpillar (NYSE:CAT), 3M (NYSE:MMM) and Stanley Black & Decker (NYSE:SWK) closely as they should report strong earnings due to the rebuild required after the hurricane. “Now, you have to keep in mind that the moves in these stocks ahead of earnings have been pretty mind-blowing, so don’t freak out if the stocks can’t get more lift after they report. That especially goes for Caterpillar, which has been nothing short of phenomenal,” said Cramer.
He expects McDonald’s to report strong earnings and will look for the opportunity to buy the stock on weakness. Chipotle will still show weakness after the recent negative publicity.
Cramer expects good numbers from Boeing and called it the best stock in the Dow. Walgreens and Coca-Cola are both in troubled sectors while he was bullish on Visa. Nike’s analyst day should throw light on the weakness in sports apparel.
Alphabet is expected to report good numbers on monetization of Youtube, Amazon will throw light on the Whole Foods acquisition while Microsoft on growth of their data centers. Intel will talk about self-driving cars and AI. It is worth noting that Intel’s stock has moved a lot already.
Cramer likes both Raytheon and Bristol Myers and thinks they should be bought on weakness.
Cramer’s expectations from Chevron and Exxon have dropped after market’s reaction to Schlumberger (NYSE:SLB) earnings. He’s not a fan of Merck or AbbVie and expects Colgate to report an upside surprise.
“Bottomline is: Remember, the bias is to buy, not sell, but only if you can get these high-quality stocks unchanged to lower. Chasing here after this big run? No thanks,” concluded Cramer.
Honeywell reported a good last quarter and its stock is up 25% for the year. “I think a lot of that strength comes down to the fact that the company’s management is quite simply very thoughtful and very rigorous. They’re patient, they’re deliberate, and they know how to establish smart processes then let them play out,” said Cramer.
After Dave Cote decided to step down, long time employee and former COO Darius Adamczyk was picked as CEO. “Cote had been grooming him for years and by the time Adamczyk took over he was more than ready,” said Cramer. He welcomed ideas from activist investor Dan Loeb from Third Point. Loeb believed that if Honeywell spins off its aerospace business which accounts for 40% of their revenue, they could generate $20B in shareholder value.
The larger review of their business led to two more spin offs. “It was a huge shift, yet the stock hasn’t done much since the news broke, even though the company also pre-announced a strong quarter that same day. Personally, I think the lack of investor enthusiasm could be a fabulous buying opportunity for you,” added Cramer.
“This is all about getting Wall Street to give the stock the credit it really does deserve, unlocking it. Money managers have trouble analyzing big conglomerates. They just do. But a leaner, stripped-down Honeywell with laser focus will be easier to get your head around. It makes me want to be a buyer,” said Cramer. He thinks that this will give Honeywell a higher PE compared to its peers and it could trade up to $205.
General Electric (GE)
Cramer has been critical on GE, which is also a holding for his trust. He now sees CEO John Flannery being ready to fix the broken company. “He can fix it because he’s willing to admit from the get-go that GE’s been very poorly run,” added Cramer.
As analysts say that a dividend cut is pending, Cramer thinks a slow and methodical approach is required along with transparent accounting. The last quarter was not good and there are still questions on GE’s power division.
“Flannery’s going to run this company like other great industrials are run, by the books, for cash and cash flow. Not the way that I would describe as being the GE way, which was totally opaque and totally nauseating,” said Cramer.
Cramer recommended two stocks as a play on the gold industry one year ago – Callaway Golf (NYSE:ELY) and Dick’s Sporting Goods (NYSE:DKS). “At the time, the conventional wisdom held that golf was dead, but I thought we were seeing some green shoots and there might be a few smart ways for you to make money with it,” said Cramer.
Callaway was a pure play on the golf industry and its stock fell to single digits before they reported a good quarter. It has come back since February and is up 25% since Cramer recommended it. Their strength came from acquisitions of golf accessory player OGIO and men’s sportswear line TravisMathew. They kept introducing new products which made the company the leading player in woods and iron sales and the second player in golf ball sales. The stock now trades at 29 times earnings, which is expensive as Q3 and Q4 tends to be leaner for golf companies. Cramer thinks investors should buy the stock on weakness going into 2018.
Dick’s Sporting goods on the other hand has been a loser since Cramer recommended it. “I thought it might be a collateral way to play the strength in golf thanks to Golf Galaxy, its subsidiary, but I was mistaken,” said Cramer. After Sports Authority bankruptcy, Dick’s and its peers seem to be in a secular decline. The stock has lost 50% of its value since recommendation and it has entered a zone which is dangerous to touch now.
Cramer thinks a safer play on gold would be to own EPR Properties (NYSE:EPR), a REIT that owns entertainment-oriented properties including many TopGolf driving ranges and yields 5.8%. He admitted that he made a mistake in stock selection and should have stuck to the pure play in golf and left Dick’s Sporting Goods out of the picture. “I got it wrong. For now, I think Callaway could have some upside long-term, but I’d wait for it to come down before I’d pull the trigger. And if you want a sleep-at-night golf stock? Please just pick up some EPR,” he concluded.
Viewer calls taken by Cramer
NovoCure (NASDAQ:NVCR): It’s a good speculating stock and Cramer likes its technology.
Barnes & Noble (NYSE:BKS): Its 8% yield is a red flag and doesn’t look sustainable.
Under Armour (NYSE:UA): It has bottomed but that doesn’t mean it will go high. The sports apparel business is still facing headwinds.
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