It’s time for investors to reconsider the stock of toymaker Hasbro after retailer Toys R Us closed the last of its U.S. stores, CNBC’s Jim Cramer said on Monday.
“You might want to use any additional Toys R Us-related doom and gloom to scale into Hasbro on weakness, because long term, you may end up looking back on this moment as a terrific buying opportunity,” the “Mad Money” host said.
Down 17 percent since its 2017 highs, Hasbro’s stock has struggled amid the long-winded liquidation of Toys R Us. Hasbro’s sales suffered as Toys R Us — which accounted for 9 percent of its sales — unraveled, forcing management to find other paths to profit including online retail.
To Cramer, the situation looked a lot like when athletic retailer Sports Authority filed for bankruptcy in 2016, which resulted in months of weakness for sportswear makers like Nike.
“But if you were patient, if you used the pain to buy Nike into weakness, you eventually got an amazing opportunity because, long term, Nike was not totally dependent on Sports Authority,” he said. “It’s the dominant player in the sneaker space and it was always going to do just fine.”
For Cramer, the biggest shocker of Monday’s rally wasn’t the Dow Jones Industrial Average’s 300-plus-point climb or the market’s ability to shrug off trade war fears. It was the bank stocks’ performance.
The rallies in shares of J.P. Morgan Chase, Citigroup, Wells Fargo, Bank of America, Goldman Sachs and Morgan Stanley sent the financial sector up at least 2.5 percent. Monday marked the best day for the cohort since March 26, based on the SPDR S&P Bank ETF (KBE).
“There’s nothing like a big up day to find out what’s really going on,” Cramer said on Monday.
Until recently, much of Wall Street was writing off the bank stocks’ weakness as a casualty of the flattening yield curve, Cramer said. Money managers were making the calculation that if interest rates were similar for long-term and short-term loans, banks would shy away from longer-term lending, a key line of business for the big banks.
“However, today’s stunning action suggests that China’s been weighing far more heavily on the banks than we thought,” Cramer said. “We can only conclude that these stocks have also been caught up in the world trade woes.”
Last November, Cramer told investors to avoid the stock of Stitch Fix, a subscription-based company that sends its users curated shipments of clothes and accessories, because of the inherent risk.
But the risk seems to have been worth the reward.
“Man, I wish I’d circled back to this one, because when Stitch Fix reported a month ago, they shot the lights out,” the “Mad Money” host said. “The quarter was so incredible that the stock instantly pole-vaulted up more than 25 percent. Incredibly, since then, it just keeps climbing; it’s now surged 64 percent since the end of May.”
Cramer’s initial qualm about Stitch Fix, which uses proprietary algorithms and human stylists in tandem to build customized outfits for its customers, was the company’s ability to prove itself in the public arena.
And although it took Cramer a few quarters to warm up to Stitch Fix, on Monday, he reversed his call on the new-age retailer.
MongoDB President and CEO Dev Ittycheria knew his newly public software company had a massive market opportunity. He just didn’t know how the relatively small tech player would seize it.
But in a recent stroke of fate, computer giant IBM — having heard from numerous clients about Mongo’s budding database platform — approached Ittycheria’s company to strike up a partnership.
“This market is one of the largest markets in enterprise software. It’s over $60 billion in size by the end of this decade,” the CEO told Cramer in an exclusive interview on Monday.
“Our biggest challenge is reach,” Ittycheria said. “Even though … we’re growing quickly, we can only touch so many customers. There’s so many opportunities and customers and markets that we can’t get to ourselves. And so what IBM does for us with their thousands of salespeople and their brand and their relationships is give us access to opportunities and customers that we just can’t get to ourselves.”
Finally, Cramer addressed a major market conflict: the battle between bullish and bearish forces.
“We have incredibly strong job growth, yet the drug stocks, the real estate investment trusts, the health cares and the utilities have all been excellent performers,” he said. “That’s not supposed to happen.”
Typically, when the economy is strong, those “slow-and-steady groups” tend to take a backseat to powerhouse cohorts like the banks and the industrials, Cramer said. But until Monday, those stocks remained strong.
“This gets at the central conflict of this entire market,” he said. “One the one hand, we have an incredible economy. On the other hand, many people are terrified all this strength will go up in smoke thanks to the president’s aggressive policy on trade, which could trigger a global slowdown that might be exacerbated by the Federal Reserve’s desire to raise interest rates.”
And while investors might be able to find good reasons to buy the stocks of juggernaut pharmaceuticals or opportunistic REITs, Cramer cautioned against the impulse to buy.
“At the end of the day, their recent strength is all about trade worries,” the “Mad Money” host warned. “Just like the industrials were mindlessly punished for fear of China, these domestic players were mindlessly rewarded for being relatively immune a global slowdown.”
In Cramer’s lightning round, he flew through his take on callers’ favorite stocks:
Solaredge Technologies Inc.: “First Solar is going to report soon and we do have to worry about the Chinese flooding solar, though we did put a tariff on it. Solaredge is a technology company connected to solar and therefore it has much higher barriers to entry and I like that.”
BB&T Corporation: “I like the regional banks. They don’t have Chinese exposure, thank heavens. By the way, PNC reports Friday. That will determine how BB&T goes.”
Disclosure: Cramer’s charitable trust owns shares of J.P. Morgan Chase, Citigroup and Goldman Sachs.
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