CNBC’s Jim Cramer often says that investors should watch the transportation stocks because they offer valuable insights into a key economic driver: commerce. And last week, things didn’t look good.
“If commerce is weak, then the stock market is going to get weak,” the “Mad Money” host said on Wednesday. “We got some real downer numbers last week from Delta, from American, holy cow. They were beginning to make me question how much we should be paying for stocks in general if they were doing so poorly.”
But when United Continental reported before Wednesday’s opening bell, the airline giant’s upside surprise brightened the outlook for the entire transportation cohort, Cramer said.
“My conclusion? Don’t despair about the transports, just question how American and Delta are doing versus the share-grabbing United Continental,” he quipped.
The U.S.-China trade war is top of mind for investors, and after interviewing U.S. National Economic Council chief Larry Kudlow, Cramer is worried it could get worse.
“Anyone who watched my old pal Larry go off on China knows that if you own shares in the companies that are thought to be dependent on China — and I’m talking about a Boeing, a Caterpillar, United Technologies, Emerson [or] so many others — you’ve got to be quaking in your wingtips,” the “Mad Money” host said.
U.S.-based industrials like these rely on China for business. The Chinese market accounts for roughly 12 percent of Boeing’s revenue, 10 percent of Emerson’s, 5 percent of Caterpillar’s, and 3 percent of United Technologies’, according to FactSet.
“China’s not ready to capitulate, and this trade war could get worse before it gets better,” Cramer, who spoke with Kudlow at CNBC’s Delivering Alpha conference, said on Wednesday.
For more of his analysis, click here.
The key to IBM’s robust blockchain business stems from three guarantees the sprawling technology company can make to its clients, Senior Vice President of IBM Global Markets Martin Schroeter said Wednesday.
“People love our blockchain,” Shroeter told Cramer in an interview. “We have more blockchains running today in the world than anybody else. The reason we have that is because of the security that comes with it.”
Blockchain technology has taken the world by storm, rising in popularity alongside cryptocurrencies like bitcoin. Cryptocurrency transactions tend to be recorded on blockchains, whose software provides a heightened level of security and encryption.
The encryption offered in IBM’s blockchain technology, which runs on the IBM mainframe, puts the tech giant in a class above the rest when it comes to making deals with global operators, Schroeter said.
To watch and read more about Schroeter’s interview, click here.
With long-term Treasury yields stalling out and investors flocking to higher-yielding “safety” stocks, real estate investment trusts have “come back into vogue” on Wall Street, Cramer said Wednesday.
In particular, shares of retail-oriented REITs Simon Property Group, Federal Realty and Pennsylvania Real Estate Investment Trust have been outpacing their peers, benefiting from broader economic concerns as well as a somewhat unexpected resurgence in retail.
“Put it all together and these retail REITs have made a remarkable comeback here,” Cramer said. “But we have to ask ourselves: Can the rally continue?”
Cramer wasn’t so sure, even as he acknowledged that all three companies were doing well.
The countrywide economic expansion is benefiting U.S. banks like First Horizon National Corp., a Tennessee-based regional bank with over 300 locations across the Southeast.
But even in a growing economy, banks like First Horizon could use some ancillary sources of capital, First Horizon Chairman, President and CEO Bryan Jordan told Cramer in a Wednesday interview.
“We have sort of a hidden capital buffer as an issuer of Visa and a receiver of Visa stock,” Jordan said one day after First Horizon issued its latest earnings report. “We have something in the $250 million-plus range of Visa stock that has about $250 million in economic value and a zero basis on book, so that in and of itself creates a capital buffer.”
Emphasizing that he was “excited” about the bank’s prospects and “looking forward to a very strong back half” of 2018, Jordan said that owning stock in Visa gives his bank breathing room when it comes to capital allocation.
“We believe we have the flexibility to take advantage of lower stock prices here with the stock being on sale and pick up a little bit,” he added.
For investors who are tired of Cramer’s endless iterations on FANG, his well-known acronym for the stocks of Facebook, Amazon, Netflix and Google, now Alphabet, the “Mad Money” host offered up some new recommendations.
He pointed to his Delivering Alpha interview with Edgar Wachenheim, chairman of Greenhaven Associates, wildly successful under-the-radar investor and, to Cramer, “the anti-FANG.”
“Ed’s all about finding value in this market and he’s finding a ton of it that no one else seems to be considering,” Cramer said. “He’s got a list of the least sexy stocks in the market, a list that puts the lie to the idea that there’s no cheap equities left out there.”
From Citigroup to Lennar to General Motors and Ford, Wachenheim has made a career out of picking stocks from massive industries that, unlike big tech, are often ignored by investors.
“So, whenever you wring your hands in disdain that FANG is all that matters, I need you to recall this commonsensical money manager who’s beaten so many of those featured today,” Cramer said. “He’s done it with unloved, undervalued stocks like the autos, like the homebuilders and the banks, three of the most out-of-favor groups in the entire stock market.”
In Cramer’s lightning round, he zoomed through his take on callers’ favorite stocks:
Twilio Inc.: “[CEO] Jeff Lawson has done a remarkable job. He had to navigate the Uber problem. He got through it. He’s got Airbnb. Look, he’s got everybody on the platform. Here’s what I have to say: I think Lawson’s done a fantastic job, and in the end, it’s still a buy.”
Apache Corporation: “Apache’s problem is too much of it is natural gas. It did have a nice move up. And I’ll tell you, I’d rather be in so many others, but if they get that natural gas pipeline through to Mexico, they are going to do incredibly well. I will give them that, but I cannot tell you to buy it up here.”
Disclosure: Cramer’s charitable trust owns shares of Facebook, Amazon and Alphabet.
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