5 Reasons To Buy The Dip – Cramer's Mad Money (11/14/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Tuesday, November 14.

Whenever the market falls down many people get scared and get out of stocks. “Don’t get me wrong, it’s OK to be concerned. You should always keep a close eye on your stocks — they’re not cash. But I think worries about a devastating sell-off lurking just around the corner are indeed overblown, because there are a lot more benign forces at work in this market and not many malignant ones that can cause fortunes to be lost in the blink of an eye,” said Cramer.

When there is no cause for the dip, low volatility despite geopolitical tensions, one should buy the dip. The current dip is similar and Cramer gave five reasons to buy the dip:

  1. Earnings: Many stocks have run higher on earnings. Since there is no news for the next 3 months, there is profit taking.
  2. Backdrop: The backdrop hasn’t changed and the long-term interest rates are not rising as expected. “I just don’t see how stocks are going to collapse under their own weight given the current benign business backdrop,” said Cramer.
  3. General Electric (NYSE:GE): The weakness in GE should not affect the rest of the market as the problems of the company are self-inflicted.
  4. Congress: There is dysfunction in Washington and Cramer thinks they should pass some kind of tax reform. “But again, the market’s recent rally has never been about tax reform, never, so it would make no sense that we crash if tax reform fails,” he said.
  5. Takeovers: When stocks tend to go down, takeovers come and rescue them.

One should buy the dip carefully so that the next dip doesn’t hit the portfolio. “Remember to build your position slowly on the way down, so that way you do not panic if the market keeps declining. So don’t panic and embrace it,” he concluded.

CEO interview – Norwegian Cruise Line (NASDAQ:NCLH)

Norwegian Cruise Line had a good quarter and its stock is up 30% for the year despite two hurricanes. Cramer interviewed CEO Frank Del Rio to find out what lies ahead.

Del Rio said that cruises appeal to younger travelers because of the experience and the activities they have to offer. One not only gets to travel to various destinations, they also enjoy entertainment, casinos and restaurants on board.

He added that barriers to entry for cruise lines are high and hence they can plan for the future accordingly. “The demand for the Cuba vacations is off the charts. The booking curve behaves more like an exotic vacation, where people book months and months in advance and the pricing is just — I can’t give you a number, but it’s just astronomical,” said Del Rio.

They are the only one of the big three cruise liners allowed to send all of their brands to Cuba. It’s one of their most profitable itineraries and they have dedicated 4% of their capacity to it.

Off the charts

After the incredible rally which was largely tech based, there comes a need to diversify as there are signs of the rally coming to an end. Cramer went to the charts with the help of technician Bob Moreno to find out which sectors are worth taking exposure to. Moreno said that most of the tech rally was based on the top 4 tech stocks Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC). “Moreno thinks the fabulous bull market in tech might be less solid than it seems,” said Cramer. The number of tech names above their 50-day moving average is declining, which is a sign that the tech rally might be near to its end.

In the energy space, the chart of VanEck Vectors Oil Services ETF (NYSEARCA:OIH) shows that it is close to breaking above its $26 ceiling of resistance. The vortex indicator made a bullish cross over signaling that energy stocks could go higher if the ETF can go higher than $26.

In the consumer discretionary space, the chart of Starbucks (NASDAQ:SBUX) shows that the stock was under pressure until last week when it broke the ceiling of resistance. The MACD indicator is heading higher and the Chaikin money flow oscillator shows positive buying pressure. “These readings make Moreno think that Starbucks’ consolidation phase may be over, with the stock finally ready to make a sustained move higher,” said Cramer.

In the healthcare and retail space, the stocks of Abbott Labs (NYSE:ABT) and Costco (NASDAQ:COST) have risen over their 50-day and 200-day moving averages respectively. Both these stocks show bullish readings and can head higher.

In the industrial space, the stock of Honeywell (NYSE:HON) shows that the strength in the stock should continue. Both RSI and Chaikin money flow indicators show that the stock has backing from deep-pocket investors.

Diversification is the only free lunch in this business. “My view? Many of these are definitely worth picking at into weakness, like the OIH, as the market gets hit with what many people see as the long-awaited pullback,” concluded Cramer.

CEO interview – Regeneron Pharmaceuticals (NASDAQ:REGN)

Regeneron just posted a good quarter and the stock went up on earnings although it’s off 25% from the peak in June. Cramer interviewed CEO Dr. Leonard Schleiffer to hear what lies ahead for the upcoming products.

Schleiffer said Regeneron is changing the way medicine gets done. They have 11 drugs in Phase I testing, 6 in Phase II and 5 in Phase III. When questioned about the competition of treatment for age-related macular degeneration drug Eylea by rivals, Schleiffer said, “If you think about Eylea, it’s a pretty high bar to take on. We’re going to give probably 2M injections of Eylea this year alone in the United States, and Novartis is two years away at least from their first injection commercially.” He added that Novartis is high on enthusiasm and low on data.

Regeneron is also working on immunotherapy treatments for skin cancer for which Schleiffer is excited.

Viewer calls taken by Cramer

SCANA Corp (NYSE:SCG): It’s near a 52-week low. There is no reason to buy the stock. Stay away.

Novacure (NYSE:NVR): Hold the stock. They have a good product.

Kratos Defense (NASDAQ:KTOS): This stock going down is an opportunity to buy.

Xunlei (NASDAQ:XNET): Cramer didn’t want to recommend Chinese stocks apart from Alibaba (NYSE:BABA).


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