Aerospace stocks have been soaring for some time, and Jim Cramer said investors looking for a new way to play the sector should look into a more under-the-radar stock: Rockwell Collins.
In addition to trading at a discount to more popular names like Boeing, the aircraft components manufacturer has also undergone a transformation in its business, acquiring B/E Aerospace to broaden its portfolio and delivering a very strong earnings report just before the deal closed.
“Given the cheapness of the stock and all the positives from the B/E Aerospace deal, I think Rockwell Collins is too sexy to ignore,” the “Mad Money” host said. “If you like the aerospace bull market but don’t like how much Boeing’s stock has run, then ring the register and swap some Boeing into Rockwell Collins. Remember, I don’t want to do this, but I know people are itching.”
Cramer finds that days like Wednesday serve to remind investors that no matter how worried they are about political turmoil or global conflict, sometimes, the bulls get their way.
From Federal Reserve Chair Janet Yellen testifying before Congress that the U.S. economy is seeing growth without inflation to rumors of the administration’s Chief Economic Advisor Gary Cohn in line to be the next Fed chief, Wednesday’s market got several unexpected catalysts.
“What happens when it all comes together?” Cramer asked. “We get an incredibly broad rally encompassing many different groups, many actually contrasting groups, the kind of move that reminds you why you just don’t just sell everything because some talking head says, ‘Oh boy, I’m scared and you’ve got to go home.’ Or, at the very least, if you don’t like the market, it signals that you’re getting a better chance to sell.”
So Cramer decided to run through 10 sectors that allowed the market to climb higher to show that the rally was really based on fundamentals, not just market sentiment.
If it is not as big as the Amazon-Whole Foods deal, it is ignored. Cramer has grown tired of this pattern when it comes to mergers, which are already so sparse in today’s stock market.
“Consider Vantiv’s recently announced purchase of Worldpay. We know that payment processors have been on fire — Visa’s red-hot, Mastercard’s red-hot, PayPal’s red-hot, and both Vantiv and Worldpay are very much part of that bull market in process,” the “Mad Money” host said. “Yet this deal, which we learned about last week, seems like it’s been flying totally under the radar screen. That seems crazy to me, even as I recognize that there’s been a lot of really distracting news coming out of Washington lately.”
Setting the Trump administration’s troubles aside, Cramer said this overlooked deal between Vantiv, a merchant acquirer that enables retailers to accept and process electronic payments, and Worldpay, a U.K.-based company of similar ilk, is worth examining in depth.
Then, after Wedbush analyst Michael Pachter reiterated his “sell” rating of Netflix on Wednesday, Cramer was glad that he at least acknowledged how wrong he has been on the stock.
“But I’m also dismayed that he’s sticking by his methodology, the same methodology that caused him and his acolytes to miss almost 100 [basis] points in a stock that, to me, is as obvious as the purloined letter,” the “Mad Money” host said. “He proudly writes: “We have consistently valued stocks under our coverage based upon the discounted present value of their future cash flows.’ Goodie. That bit of ideology reminds me of that quote everybody attributes to Albert Einstein about the definition of insanity: doing the same thing over and over again expecting different results.”
Pachter has been bearish on the stock of Netflix for about three years, during which time the stock ran from $63.49 to nearly $160.
The analyst justified this using traditional metrics like discounted future cash flows, or how much the money Netflix is set to make in the future is worth now.
But Cramer argued that Netflix, as a company, should not be valued in the same way as others.
Finally, Cramer sat down with Brian Walker, the CEO of furniture manufacturer Herman Miller, to hear more about how his company is capitalizing on key market trends.
“We see the consumer being quite strong. Now, a lot of what’s happening to us is there’s this overall trend towards re-urbanization,” Walker told Cramer on Wednesday. “Think about how many people are moving back into city centers … That’s our customer: people who love design who want to be inner city dwellers.”
Besides the company’s marked presence in cities, where numerous Fortune 1000 companies supply their employees with Herman Miller’s popular office chairs, Walker said innovation has put his company on the Internet of Things map as well.
“We’ve entered the [Internet of Things] field with a product that not only makes a desk pair with you and know you, but also pairs the chair to it,” Walker said. “So, imagine that you’re getting up, you’re standing, and the desk automatically rises with you. But it knows, if you’re going to get a cup of coffee, not to rise. So it starts to be almost like the interior of a car, where the product starts to know you, grow with you, and it’ll provide benefits to the facility owner or the company about what’s being used. What’s the activity levels of their people? Are the right people sitting with each other? So it’ll begin to be a data play as well.”
In Cramer’s lightning round, he flew through his take on some callers’ favorite stocks, including:
Starbucks: “OK, Starbucks went to $64 on talk that they were going to be able to have a better mobile pay experience that might take comparable-store sales up to 4 to 5 percent. The stock then pulled back to $57, $58 when word is that they’re still going to be down to 3 or 4 percent. I say – my charitable trust owns it – just ride it through. They will solve the mobile pay mosh pit problem, though don’t expect a big upside surprise this quarter.”
STMicroelectronics: “I think you picked a good one. But if you do want automation and machine learning, then you’re going to have to step up to Nvidia because they are the king of both.”
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Source: Tech CNBC
Cramer Remix: This stock is just too sexy to ignore