CNBC’s Jim Cramer has a special investing method for when a small, but market-wide decline hits stocks in the middle of earnings season.
“I’ve got a set of disciplines … that forces you to confront the ‘nothing’s down enough’ lame excuse for not taking action,” the “Mad Money” host said. “So let me give you Cramer’s rules for sell-offs during earnings season, because earnings season is totally fraught with unusual risk and is quite different from Cramer’s rules for everyday sell-offs.”
First, Cramer pointed out that the tidal wave of reports can be especially taxing on the analysts that cover stocks. Second, he tried to pinpoint what caused the sell-off.
Wednesday’s disappointments included AT&T’s worse-than-expected earnings report (which Cramer thought could be a buying opportunity seeing as the Time Warner merger should boost its cash flow); Chipotle’s growth-lacking report (which Cramer thought was not major enough to drag on the market); and Advanced Micro Devices’ weak profitability forecast.
“AMD’s guidance, which was sub-optimal, had a lasting impact on lots of areas within tech, and many of those areas had been strong,” Cramer said. “Still, though, I can’t countenance the idea that AT&T, Chipotle and AMD are responsible for the magnitude of today’s sell-off.”
In a lively year for technology-related initial public offerings, yet another tech IPO in the caught Cramer’s eye last week: that of MongoDB, a software platform for organizing databases.
Shares of MongoDB came public at $24, closing above $32 the same day. Since then, its shares have dipped back to the $31 level. As such, Cramer wondered whether the highs can last.
“Is this tech stock worth speculating on, or will it be another Snap or Roku or Switch, three newly minted IPOs that have been slammed since they came public?” Cramer asked. “Let’s find out by playing one of my favorite games. We’re going to play Know Your IPO.”
With stocks finally taking a break from rallying, Cramer circled back to one out-performing stock that could be a buying opportunity on the market-wide weakness.
Stanley Black & Decker, which makes a variety of tools and some security solutions, just issued a strong quarterly earnings report that sent its shares soaring. So far in 2017, the stock has gained 42 percent.
“Look, you rarely get a chance to buy this stock into weakness,” Cramer said. “What’s behind the strength at Stanley Black & Decker? When you dig down, the explanation’s pretty clear: the company’s been making some very shrewd moves with its product portfolio, the shrewdest of all being the acquisition of the Craftsman tool business from the moribund Sears Holdings.”
Cramer said that, while Stanley Black & Decker was always a steady performer, everything changed when James Loree became CEO in July 2016.
After fast-food giant McDonald’s and Chipotle issued their earnings reports, Cramer noticed a pattern forming between the market’s old-line names and newer players.
Chipotle’s report was weaker than Wall Street expected, with earnings and revenue missing expectations and a dramatic, mid-quarter deceleration in same-store sales, a key metric for the restaurant industry.
Former Chipotle parent McDonald’s, on the other hand, exceeded same-store sales growth expectations with its report, introducing new technology, mobile ordering and other promising initiatives.
“It was almost as if Chipotle was the hidebound, troubled, figure-it-out-as-we-go-along kind of company levered to one new dish, the queso, while McDonald’s was all about execution and value, the twin pillars of higher stock prices,” Cramer said.
The notion that the eSports industry has hit its peak is totally unfounded, Logitech International CEO Bracken Darrell told CNBC in an interview with Cramer on Wednesday.
“[eSports] absolutely is not even close to peaking,” the CEO said, telling Cramer that next weekend, he will attend the League of Legends championship final in Beijing, China.
Riot Games’ League of Legends is an online, multiplayer battleground video game known for being the top game in eSports, as Darrell and leading gamer Andy Dinh told Cramer in July.
“There will be 110,000 people in the Olympic stadium in Beijing, and that thing is going to be watched by more people than probably any global sporting event besides the World Cup, the Olympics or the Superbowl,” Darrell said.
When asked about the ultimate winners and losers of the eSports industry, Darrell offered a fairly democratic response:
“We’re a Swiss company and we love to play with everybody. And we’re excited about all these different sports, all these different companies creating leagues,” the CEO said. “I think there’s going to be more and more, so there’s no way to lose, I think, in this space unless you’re not in it.”
In Cramer’s lightning round, he shared his take on some callers’ favorite stocks:
Corning Inc.: “It was good. It was good. Now, here’s my issue: when I see a stock like GLW that has just spiked big, I like to wait until it comes down a tad after the quarter. Forty cents, not enough. Maybe we get some more pressure [on Thursday] and you take advantage of it.”
Biogen: “I would [hold]. There’s a lot of people who feel like this was a weaker quarter. There were some things that were wrong. I’m not nearly as negative. I think it’s fine.”
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Source: Tech CNBC
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