High Hopes Are Hurting Stocks – Cramer's Mad Money (10/23/17)


High Hopes Are Hurting Stocks – Cramer's Mad Money (10/23/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday, October 23.

In the biggest earnings week, there is something unique for stocks that are winning. “The biggest winners so far of the earnings season ahead of what’s going to be an amazing week? It’s the stocks of companies that were supposed to report sub-par earnings. These are the stocks that are really exploding higher,” said Cramer. Seagate reported a better than expected quarter while sub-par numbers were expected. This resulted in 12.6% up move. “This gave some encouraging signs about its data center business levered to its biggest disk drives. No one saw that coming. That’s why this stock rallied so big,” he added.

The pin action of this was seen in other semiconductor stocks. The same applied to the apparel maker VF Corp (NYSE:VFC), which was expected to report ordinary numbers as the entire group was struggling. However, they managed to beat the numbers and issue good guidance which led to 5% rally in the stock. The pin action was seen in other apparel stocks as well. Cramer appreciated that the management spoke about their brand connection with consumers on the conference call.

The flip side to this is also true. Companies that were expected to report good numbers but ended up disappointing, saw their stocks decline. Be it Unilever (NYSE:UL) with disappointing earnings or Proctor & Gamble (NYSE:PG) with light guidance, both the stocks went down along with pushing down other stocks.

“This is the biggest earnings week of the year. Look over your portfolio. Are hopes low for your stocks? That’s good. Are hopes high? Be very careful,” concluded Cramer.

CEO interview – Hasbro (NASDAQ:HAS)

Hasbro delivered a good quarter and its stock went up briefly. However, Q4 guidance cut led to heavy selling which led to 8.5% decline. Cramer interviewed CEO Brian Goldner to know more about the quarter and Toys R Us bankruptcy.

“We didn’t know that it was going to happen, and obviously when you first hear about this you take a few days off. We wanted to understand exactly what the impact might be,” Goldner. He added that Toys R Us bankruptcy won’t stop Hasbro from selling toys at their stores. Goldner called the near-term movement disruptive as the company had paused shipments to get a stock of the situation. “It’s taken us a month to get a plan together and a new agreement with them which we’ve signed just a few days ago,” he said.

“Toys R Us has been a great partner for us and has grown, but we’ve also grown our retail footprint. We’re making new and differentiated product that goes to a bigger retail footprint around the world, to value stores and dollar stores, to mass retail and, of course, to omni-channel and online. What we see is a growing retail environment and, certainly, long term, 2018 and beyond, we don’t see this persisting as an issue,” said Goldner.

Hasbro has been working to alter contracts with online sellers and improve price points along with innovation in new toy lines to prevent single handed hits like Toys R Us bankruptcy.

Talking about products, Goldner mentioned that “My Little Pony” franchise is performing well along with their packaged goods and game businesses. They also continue to see good box office sales and are looking to generate new revenue streams in home entertainment. For 2018, they have tie ups with Star Wars, Marvel, The Avengers, Han Solo and Transformers.

Schlumberger (NYSE:SLB)

Oil bouncing back is good news for Schlumberger. They reported decent earnings, but the management commentary was more bullish than many realize. After spending years sideways, the oil industry is about to get back on track.

They have had a tough year as Schlumberger was trading at $60 when oil was $20, and they are still at $60 when oil is trading over $50. Cramer thinks analysts and investors are focused on near-term weakness rather than what’s in store for 2018.

Schlumberger has been in the industry for long and they see the inventory reductions as positive sign for balance in supply and demand. They noted that OPEC production cuts are working and old oil fields are not replenished in-line with the demand.

“At these levels, with oil possibly making a major comeback next year, I think you’re getting an excellent buying opportunity in the best stock of the best company in the entire industry, Schlumberger,” said Cramer.

CEO interview – Agenus (NASDAQ:AGEN)

For the second interview of the show, Cramer invited small cap biotech Agenus CEO Garo Armen, which is working on personalized vaccines to help patients fight cancer, among other diseases.

They have created a cell therapy subsidiary, AgenTus Therapeutics, that will focus on developing and commercializing cell therapies. Armen was excited about this given Gilead’s (NASDAQ:GILD) $11B purchase of Kite Pharma (NASDAQ:KITE).

Apart from cancer, they are also working on vaccines for malaria and shingles. Both these areas have money to be made as per Armen and they are working with hospitals for tissue samples to determine which genetic markers work for patients.

Commenting on their timeline, Armen said “cell therapy has moved very rapidly. So it’s very conceivable that, first of all, we’ll be in the clinic next year. And it’s conceivable that, within two years or so of being in the clinic, you can have a filing for commercialization, whereas with other immuno-oncology products, for example, our antibodies, we expect to do our first filing in 2019.”

Viewer calls taken by Cramer

Which game stocks should a young investor put their money in? Activision Blizzard (NASDAQ:ATVI) is a pure growth stock due to eSports and Take-Two Interactive (NASDAQ:TTWO) if there’s a pullback.


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