Investors who own the likes of Apple, Facebook, Microsoft and Amazon need to remember why they bought those stocks in the first place if they’re going to survive the tech giants’ earnings reports, CNBC’s Jim Cramer said Monday.
“Everyone who dumped Apple or Facebook or Microsoft earlier this earnings season now has a serious case of seller’s remorse,” he said on “Mad Money.” “Don’t be distracted by short-term problems that can vanish overnight like we saw with these winners. Focus on the long term, and the next time one of these terrific stocks sells off, then you know it’s time to buy.”
Apple’s stock, for one, got some reprieve after the company’s negative first-quarter pre-announcement. Expectations were so low ahead of its earnings report that the iPhone maker actually managed to surprise to the upside after spending much of January trading close to its 52-week lows.
But J.P. Morgan’s suggestion that Apple should buy a company like Activision Blizzard, Sonos or Netflix caught Cramer off guard. He maintained his call that the tech giant should get into health care, doubling down on the idea in conversation with a caller.
“When I talk about what Apple could buy that would really help them in the health-care segment, I mistakenly neglected that if they could somehow do a merger with Dexcom, that would be really unbelievable, too,” he said.
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There’s a leadership rule in the sporting world that translates well when it comes to the stock market, and investors can use it to find winning stocks, Cramer said Monday.
“The coaching tree is a pretty simple concept: if you hire top assistant coaches who’ve learned firsthand from the most successful leaders in the game, they’ll be able to take that knowledge with them,” Cramer explained. “We know that there are some incredible CEOs out there who, in addition to creating enormous value for their shareholders, have also trained some very impressive disciples. Inevitably, some of these disciples leave to run companies of their own.”
Eventually, that lineage can evolve into an “executive tree,” similar to the National Football League’s famous coaching tree stemming from legendary coaches Bill Parcells and Bill Belichick, the “Mad Money” host explained.
“The best executive tree I can think of descends from … Marc Benioff, the visionary founder, chairman and co-CEO of Salesforce.com,” Cramer said. “Benioff’s got a real knack for fostering talent, … and when his lieutenants move on to run other companies, they have a habit of delivering some incredible performance for their investors.”
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Cramer has noticed a “bizarre dichotomy” between how the chip stocks and the stocks of their suppliers are trading, and it’s starting to concern him.
While shares of the semiconductors have been roaring, surpassing a key hurdle Cramer flagged on “Mad Money” last week, shares of the industrial companies that supply the chipmakers have “been crushed,” Cramer noted Monday.
In fact, DowDuPont, 3M, Illinois Tool Works and Honeywell — all of which make supplies for the semiconductor industry — flagged their technology divisions as areas of weakness this earnings season. At the same time, their customers — companies that make the equipment for building chips, like Lam Research — essentially called a bottom in tech.
“You’ve got to wonder, isn’t this a dangerous contradiction?” Cramer said. “How can Lam be bullish on this business when 3M, Honeywell, Illinois Tool Works and, most importantly, DowDupont are so bearish?”
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Clorox CEO Benno Dorer laid out his company’s recent successes in an interview with Cramer after earnings. The results pushed shares of the consumer packaged goods company up nearly 6 percent on Monday.
“This was a strong quarter for Clorox, with 4 percent sales growth and, importantly, a return to gross margin expansion, which is so important to us,” Dorer said. “We leaned into pricing to offset cost increases very aggressively, and that’s been paying off for our shareholders, which is why we have been able to confirm our sales and earnings outlook.”
The price increases were what enabled Clorox to grow its gross margin again, the CEO explained. And while Clorox saw some international weakness, Dorer maintained that foreign markets only make up 17 percent of its total business.
Calling the United States a “strong” and “stable” market, Dorer forecast “another strong fiscal year,” citing “green shoots” in Clorox’s budding natural products, vitamins and supplements business.
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Cramer often tells investors not to fall in love with their stocks, because getting too close to their holdings can cloud their judgment. Last week, that got taken to task when Align Technology reported.
“Even though the numbers weren’t that great, the stock actually rallied after initially getting hit. Normally, when I see a stock go higher on seemingly bad news, that tells me that we’ve arrived at a bottom because there’s no one left to sell. That’s not the case this time,” Cramer warned. “If you still own Align Technology, I need you to listen to me: I think you should actually unload some of your position, because I do not like where I think this company could be headed.”
“Look, Align Technology has made many of our viewers a lot of money over the years. But an Align with competitors is a totally different story from an Align with no competitors,” he explained.
And with the stock trading at 35 times next year’s earnings estimates — a concerning multiple if you don’t think Align can meet the guidance, and Cramer doesn’t — this dentistry play is looking more and more risky to the “Mad Money” host.
“Here’s the bottom line for a stock that we have pushed forever: Align Technology was one of the best growth stocks around — it had a superior product and the stock deserved to soar — but now, Align has a bunch of new competitors and that makes this a much less compelling story,” he said. “So, if you own this one, I say take advantage of this recent strength and ring the darned register.”
In Cramer’s lightning round, he shared his rapid-fire responses to callers’ stock questions:
Cullen/Frost Bankers Inc.: “It is one of the few regional banks that I actually feel good about. You know, we keep getting downgraded, downgraded, downgraded, a bunch of these. No one’s downgrading Cullen/Frost. Why? Because the business is very strong.”
Tyson Foods: “They report this Thursday. I think it may be a sucker’s game to try to predict. This company has become one of the most unpredictable companies in the whole country, so I am going to say that I have to wait myself to see what they’re going to do.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Facebook, Microsoft, Amazon, Salesforce, DowDuPont and Honeywell.
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