Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, October 11.
Cramer gave an analogy that stock picking is like fishing. “This is like fishing, catching a 40-inch edible fish every day, each different from the day before,” he said. For instance, Wednesday’s catch was McDonald’s (NYSE:MCD) which made an all-time high on no news. PayPal (NASDAQ:PYPL) was a good catch too as the stock went up on analyst upgrade to buy from hold. Cramer gave his list of 5 reasons as to why to stock market has so many good catches.
- Funds: In the final months of the year, the money managers turn to stocks to show performance. “You can’t show performance in this market without buying stocks,” said Cramer.
- Trump: President Trump’s pro-stock market agenda is working. Even though the healthcare reform has not been passed, his pro-business positions make companies less worried about regulations. “I know he disbanded the economic councils, but he still has those contacts and he knows what sends the stock market higher,” added Cramer.
- Analysts: With positive market outlook, analysts are presenting their clients with new stocks that look promising. “If you work at one of these larger brokerage houses, your research director is in your face begging you to put out some new names knowing they’ll pop,” he said.
- International: The world is improving. Japanese stocks are rising and European economy is gaining momentum and Spain conflict did not add fear to the market as once thought.
- News: A slower news cycle has had no effect on potential for a December rate hike. This will cause a rally in bank stocks.
Cramer points out that investor’s exuberance cannot last forever. Bad stocks exist too; for instance the oil stocks and some retail stocks have gone down.
“As the legendary Ella Fitzgerald sang in ‘Summertime,’ the fish are jumping and the cotton is high. If you don’t grab a pole, though, and buy some bait, it’s all going to be lost on you as it is on so many Americans who don’t know a rod from a reel,” concluded Cramer.
Venator Materials (NYSE:VNTR)
Cramer likes break up deals that unlock shareholder value and Huntsman (NYSE:HUN) spinoff of Venator Materials in August is one such deal. It was the commodity chemical division of Huntsman that produced titanium dioxide and other chemical additives. Cramer thinks the timing of the spinoff was good as the demand in the titanium dioxide industry was picking up.
While titanium dioxide on itself is not exciting, but the specialty versions made by Venator command three times higher prices as they are made to exacting standards. The US and Europe are recovering, and Cramer thinks this recover will be long-lasting which will benefit Venator.
There are no new titanium dioxide plants under construction in the US and it could take 3-4 years for a plant to complete. On the competition front, Venator holds strong as well. The stock is cheap and trade at just 9.5 times next year’s earnings.
“This story has a lot going for it, more than almost all the other spin-offs I’ve heard of, and unlike so much of the market, this is a cheap stock. I say the potential rewards dramatically outweigh the risks and Venator’s stock makes a ton of sense to buy in this wildly pro-spin-off market,” said Cramer.
When Sports authority went bankrupt in 2016, it hit Nike and Under Armour. However, the thought was that after Sports Authority inventory was worked out, things will improve for the retailers. “But now we’ve lapped the store closures and yet things just keep getting worse, something very few foresaw,” said Cramer.
After the bankruptcy, companies had to take impairment charge for the excess inventory. As a result, all companies with excess inventories were hit as they had to discount this to bring in new merchandise. “Things then got real ugly. A year ago, many investors were still optimistic this would just be merely a temporary disruption. The idea was that, eventually, Sports Authority’s closure would benefit competitors like Dick’s Sporting Goods (NYSE:DKS) or Finish Line (NASDAQ:FINL) or Foot Locker (NYSE:FL). Man, that’s not how it played out at all. If anything, the same-store sales from these sports-oriented retailers have just cratered,” said Cramer.
In reality, Sports Authority turned out to be just one of the problems of a larger issue. Consumers were not interested in sports apparel and those who were buying, were doing it online. That’s what forced Under Armour to partner with Kohl’s (NYSE:KSS) and Nike (NKE) began selling on Amazon (NASDAQ:AMZN). VF Corp has taken a different route by building out its e-commerce and direct-to-consumer channels.
“You don’t just build out a strong online business overnight; and its gross margins are now bouncing back. Turns out, like with so many other product categories, people just don’t want to buy this stuff in the store if they can get it online,” said Cramer.
“In retrospect, the bankruptcy of Sports Authority was a watershed moment for the athletic wear group,” concluded Cramer.
CEO interview – Seattle Genetics (NASDAQ:SGEN)
Seattle Genetics is a biotech company focused on cancer treatments. The stock is up 16% in 2017. They announced 2 clinical trial collaborations for cancer therapy and their stock went up. Cramer interviewed CEO Clay Siegall to know more about this development.
Siegall mentioned they recently completed a five-year study with 1,300 patients that was awarded breakthrough designation by the FDA to treat Hodgkin’s lymphoma.
That’s not the only treatment the company is working on. They have partnered with other pharmaceuticals for developing treatments for bladder cancer and cervical cancer. “Seattle Genetics is really changing from a one-drug company to a multi-product oncology company addressing unmet medical needs,” added Siegall.
Viewer calls taken by Cramer
Oracle (NYSE:ORCL): Cramer thinks the stock is worth $52.
Ulta Beauty (NASDAQ:ULTA): Ulta is down due to Amazon. Don’t buy at these levels and Cramer thinks it should be revisited retailer.
Sears Holdings (NASDAQ:SHLD): Cramer is not sure how they will get out of this tailspin.
Baozun (NASDAQ:BZUN): It’s a wild trade but Cramer thinks more stock can be bought below $30.
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