CNBC’s Jim Cramer sees far too many investors ignoring a simple formula that has kept him level-headed during his years on Wall Street.
“Newsflash: stocks, by and large, do get cheaper when they go lower. Call me captain obvious for pointing it out, but I think this commonsense wisdom often gets ignored when we’re analyzing stocks on a day-to-day basis,” the “Mad Money” host said.
Cramer was reminded of the phrase on Tuesday, when Apple launched an array of new products, including a special-edition iPhone X for the 10th anniversary of the first iPhone release.
He was amazed that he kept hearing people asking each other if they would upgrade and being receptive to the new model instead of balking at the $999 price tag.
“I haven’t heard anyone say, ‘Nah, I just bought the [iPhone] 7.’ I’m either hearing, ‘Yes, I’ll upgrade,’ or ‘I hope someone will buy it for me,'” Cramer said. “That’s incredible. That’s what I call consumer product amore. It’s the most beloved device I can remember.”
But it wasn’t that long ago when Apple shares took a nosedive from $131 in May 2015 to $92 in May 2016, and CEO Tim Cook came on “Mad Money” to clear the air about the stock market’s premature assumptions about what turned out to be a successful product transition.
“In short, this was a stock that got cheaper as it went down, and if you bought it in the $90s after Cook spoke to us, well, you made a ton of money,” Cramer said.
Treasury Secretary Steven Mnuchin is eager to complete tax reform this year, and while Cramer fully understands its benefits, he’s not convinced it will happen.
Lower corporate taxes would push companies to repatriate their assets back to the United States, which they have been resisting because of high, noncompetitive U.S. tax rates. Domestic companies could then use that money to hire more people and expand business, thus growing the U.S. economy.
“However, as much as I love tax reform, I’m a realist,” Cramer said. “Earlier this year, at the time of the inauguration, I could not have been more excited about the president’s economic agenda. But not anymore. I know better now.”
As the host of “Mad Money,” Cramer always tries to find positive trends that can help you make money even in the most dismal situations.
And while there’s no way to make light of the tragedy that came out of Hurricanes Harvey and Irma, some sectors actually did benefit from the destruction in the South, Cramer said.
“There are some industries that truly make out like bandits when the Gulf Coast gets hit with a really bad hurricane. I’ve already talked about how the half million wrecked cars from Harvey could lead to a resurgence in the auto industry [and] how the insurance industry might be able to raise your rates without paying out as much in claims because so few people have flood insurance on their homes,” Cramer said. “The biggest winner, though? Probably the oil refiners.”
Then, Cramer sat down with Lew Cirne, the founder and CEO of software monitoring program New Relic, which boasts high-profile clients like BAMTech, Major League Baseball’s digital arm that was recently purchased by Disney, and Wal-Mart’s Jet.com.
New Relic helps its customers run their online businesses smoothly, using a dashboard system to ensure their networks don’t go down during critical moments or higher-than-usual traffic.
“If you think about it for Jet or for MLB, there are these moments of truth where you must shine,” Cirne told Cramer on Tuesday. “It could be the World Series or it could be Black Friday for Jet.com. At that moment, you need to know exactly what’s going on in real time. Are people able to purchase the items online? What are they browsing? If it’s slow, why is it slow? How do I make it faster immediately?”
And when it comes to competitors like Cisco, which just purchased a competing service, Cirne said New Relic is at an advantage as a new, entirely cloud-based company.
“We’re happy to compete against Cisco. We do it all day long because where we’re strong is in the cloud. We’re a 100 percent SAAS-delivered company, and that’s where the future is,” Cirne said, using a common acronym for “Software As A Service” companies. “And so our competitor has an on-premise bias and they were bought by a company with an even stronger on-premise bias, so we don’t have any problems competing with a company that has historically been in the networking space.”
Finally, Cramer spoke with Debra Cafaro, the chairman and CEO of real estate investment trust Ventas. Cafaro said her REIT, which focuses mainly on health care-related real estate, recently made an investment in a popular new growth area: life sciences.
“We’ve invested or committed about $2 billion in capital so far. And it’s a university-based life science business. So [it’s an] incredibly needed business because, as we know, there’s so many Americans with chronic illness, so much research to be done, and universities, even highly rated ones – and most of our customers are A-rated or better – want to leverage their capital because they’re capital-constrained, and so we can develop and own these buildings for them,” Cafaro said.
The CEO said that Ventas’ investment currently accounts for 6 percent of its business and will grow to 10 percent of the business over time. She touted the investments as a “really good risk-adjusted return” for Ventas due to the beneficiaries’ strong credit status.
“The universities are the engines of economic development in these sub-markets, they’re magnets for private capital who want an employed workforce, and so we bought a great portfolio,” Cafaro said. “It’s at Yale, at Duke, at Brown, at WashU, at UPenn Medicine … and we are developing these hubs of research and innovation with and for these universities to help them grow by using our capital.”
In Cramer’s lightning round, he flew through his take on some callers’ favorite stocks:
RH: “When Gary Friedman, the CEO, bought a huge amount of stock at $25.26, we would’ve said we want to go with him because that was a huge insider buy. Now the stock has more than doubled. They did have a good quarter. The stock has continued to be propelled higher. I prefer to wait for a 10 percent pullback, but what a good presentation he made last week in New York. What a guy.”
Advanced Micro Devices: “AMD does have this big overhang of an investment that another company made in it, which is why it’s stalled. It’s why I’d prefer Nvidia, and Nvidia, by the way, is not a cryptocurrency play. It happens to have some cryptocurrency people in it, [but it’s] less than 10 percent of the business.”
Disclosure: Cramer’s charitable trust owns shares of Apple and Nvidia.
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Source: Tech CNBC
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