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Technology

Cramer's game plan: In a market on edge, stick with the bulls

With the market trying to parse conflicting economic indicators, like strong employment but weak housing, auto, retail and oil sectors, Jim Cramer is looking for resolution.

“I don’t even know if there is a market to care about now. There are just incredibly pronounced sectors and remarkably vicious rotations into and out of them,” the “Mad Money” host said.

Health care stocks may have rallied this week on fears of a slowing economy, but most other sectors took a dive except for a small relief rally on Friday.

And with the Federal Reserve progressively tightening interest rates, employment remains one of the very few indicators that support the notion of a strengthening economy, Cramer said.

With that in mind, here are the stocks and events Cramer is watching next week:

Monday: Durable goods orders, Schnitzer Steel

Durable goods: U.S. orders for long-lasting manufactured goods are expected to be negative because of the weakness in key areas of the economy, but Cramer said that a stronger number could make the case for more interest rate hikes and better economic sentiment.

Schnitzer Steel: The $500 million scrap steel company reports before Monday’s opening bell, and if President Donald Trump’s administration succeeds in issuing legislation that protects the steel industry from foreign competition, Cramer thinks this stock could soar.

“Remember, Trump ran on preserving the steel industry above almost all others, save coal. I think he means business,” the “Mad Money” host said.

Tuesday: Darden Restaurants, KB Home

Darden: The Olive Garden parent company will report earnings, and so far, Cramer has not seen its bargain restaurant business getting hit by the rise of the stay-at-home economy.

“Those of us who like Olive Garden know that we always feel like as though we ‘beat them,’ meaning that we get more food for less than money than we could anywhere else, and maybe more than it even costs them to prepare. Why is it so hard for other operators to realize that, if you’re going to have people stay at the restaurant rather than take the food out, you’ve got to let them have seconds for free?” Cramer wondered.

KB Home: Cramer was ridiculed for recommending this homebuilder’s stock when it was at $14. Now, it will report earnings with its stock at $22, and the “Mad Money” host thinks it is due for some analyst upgrades.

That said, Cramer no longer finds the stock as attractive because it has run too far. He prefers Toll Brothers, which he said represents a better value.

Wednesday: General Mills, Cisco, Federal Reserve analysis

General Mills: At this point, Cramer and the rest of the market have gotten used to disappointments with this consumer foods giant.

Despite numerous attempts to turn around its business, General Mills has not been able to deliver good top line growth. Cramer expects that to continue when it reports on Wednesday.

“The home run would be an outright sale, but General Mills values its storied independence. And while I believe it would be a fantastic combination with none other than Mondelez, the snack food play we had on last night, I just don’t think a deal is in the cards,” Cramer said.

Cisco: An analyst meeting at this software company could be a key moment, as Cisco has fallen out of favor with investors who are turning to faster growing cloud and semiconductor players.

“Maybe Cisco announces something that shows a brighter growth path,” Cramer said. “Otherwise I bet it will continue to sit out this multi-month tech rally.”

Fed: After Wednesday’s close, the Fed will release results from its Comprehensive Capital Analysis and Review, and Cramer says they are far more important than banks’ stress test results.

“All banks passed the stress tests with flying colors. But CCAR, as it is known, will be about green-lighting banks to return more capital. Now, the hope for many banks is that the Trump regime’s desire for deregulation will be reflected in these results and you’ll see some major dividend boosts and buyback in the wake of the news,” Cramer said, adding that Citigroup could be a leading benefactor.

Thursday: Constellation Brands, Nike, Micron Technology

Constellation Brands: Cramer thinks investors underestimate the growth at this alcohol distribution giant, which has exhibited a pattern of expertly scaling the brands it buys and will report its latest quarter’s earnings before the bell.

“High West, Prisoner — the wife’s fave — and Case Noble — my fave — were all brilliant acquisitions at tremendous prices, much better than the billion dollars that Diageo’s shelling out for George Clooney’s Casamigos tequila,” Cramer said.

Nike: “After the close we hear from a company that’s become very controversial: Nike,” Cramer said, referencing conflicting views about whether investors should buy or sell shares of the sports apparel retailer before it delivers earnings.

“Me? I despise battlegrounds, and Nike’s the Wall Street equivalent of the Somme. If you want to invest in apparel, go buy some PVH, which is underrated and doing fabulously,” he added.

Micron: Everyone is expecting a blowout quarter when this chipmaker reports, so Cramer is left expecting one key announcement from its executives:

“Micron’s management needs to raise its forecast enough to convince people that its business still hasn’t reached saturation,” he said. “Remember, though, this is a boom-bust situation, supply-demand, and I think some analysts will downgrade Micron no matter what the quarter is.”

Friday: End-of-quarter selling

The last day of the week also marks the last day of the quarter. The “Mad Money” host said that people usually try to ring the register and sell on these days.

“My advice? If you’re a trader, anticipate this decline and do some selling [Wednesday] to get ahead of the scalpers [Thursday],” Cramer said. “But if you’re an investor, hey, I’ve got an idea. Keep your powder dry, and come in on Friday afternoon and do some buying.”

Overall, Cramer recommends staying with the sectors that tend to stay secular and avoiding the beaten-down names even if you think they may be bottoming.

“This market lives on the edge at all times because it no longer trades in unison,” Cramer said. “It’s made up of a whole bunch of little submarkets. So stay in the bull markets, namely tech and health care, and avoid the bears, like oil and retail, and you’ll be just fine.”

Disclosure: Cramer’s charitable trust owns shares of Citigroup.

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Source: Tech CNBC
Cramer's game plan: In a market on edge, stick with the bulls

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