A Tale Of Two Markets – Cramer's Mad Money (10/30/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday, October 30.

Looking for stocks in the current market is like walking down the aisles of a supermarket. You might get to ride the bull in one aisle or might get hit by the bear in the other. “This is a really Dickensian, ‘Tale-of-Two-Cities’-style market. It is at once the best of times if you own the banks and the techs or the industrials, and it’s the worst of times if you own the drug stocks, the consumer packaged goods plays or anything retail. This dichotomy plays out every single day,” said Cramer.

As Citi lowered the ratings for Macy’s (NYSE:M), other retail stocks went down with it, as J.C. Penney (NYSE:JCP) took the mall sector down. Citi says that Macy’s needs to cut its 8% dividend but Cramer said that’s the reason investors hold the stock. It’s basically due to Amazon (NASDAQ:AMZN) excelling at everything which is hurting not only retail, but the healthcare sector as well, as Amazon also wants to enter that area.

“It’s almost as if Amazon is a country within itself. It’s got the best tech, the best selections, the best prices, and the best delivery,” said Cramer. However they are not into healthcare yet but want to enter the industry and that anticipation is affecting the stocks. The stock of Walgreen (NASDAQ:WBA) is down 20% for the year on this news. Even CVS (NYSE:CVS) approached Aetna (NYSE:AET) for merger talks to get ahead of the competition Amazon may give in the future.

Things are looking good on the tech side. Alphabet’s (NASDAQ:GOOG)(NASDAQ:GOOGL) search engine is seeing more ad clicks and Apple (NASDAQ:AAPL) is gaining steam. Nvidia (NASDAQ:NVDA) continues to be on the high list by outperforming its peers. The bank stocks are doing well in anticipation of another rate hike in December. On the flip side, the money is flowing out of consumer packaged stocks like Kimberly-Clark (NYSE:KMB) and getting into industrial stocks like Caterpillar (NYSE:CAT) and Boeing (NYSE:BA).

“What can I say? The bottom line is that if you stroll down the wrong aisle of the stock supermarket, you could get eaten by a bear. You get in the right one, like the banks, the techs or the industrials, then you’re riding the bull,” concluded Cramer.

CEO interview – Columbia Sportswear (NASDAQ:COLM)

Columbia Sportswear reported a good beat in the last quarter. Its stock is up 9% in the year which has seen unseasonably warm weather. Cramer interviewed CEO Tim Boyle to find out what lies ahead.

Boyle said that the warm weather has been extended this year and it’s terrific when it’s cold and snowy for the boot makers. They have been diversifying their products from just being winter wear to others. The U.S. has 6 times the number of stores as compared to other parts of the world and the company derives 60% of its sales domestically.

“Nobody needs another brand of footwear or apparel. Regardless of how impactful our products are, it’s about being different and it’s about differentiating yourselves from others,” added Boyle. He spoke about the company’s ad campaigns with rap artists and their collaboration with Disney’s Star Wars franchise. “Our marketing spend is only around 5% of sales. Some of our competitors spend up to 12. We don’t think we need to spend that much, but we need to find more capital to spend on marketing and, frankly, we need to be more profitable,” said Boyle.

“We have legacy activities which are not moving the business forward. We need to uncover those, allow our employees to really talk about those areas of the business which are not helping and may be holding us back, and allow for the business to grow,” concluded Boyle.

Snap Inc. (NYSE:SNAP)

Cramer re-visited the once red-hot IPO of Snap which eventually fell out of favor. He wanted to find out if the stock is worth a buy at current levels. After hitting a peak of $29.44, the stock fell down and bottomed around $11.28 in mid-August. “But now, the situation’s starting to get different. Almost all the hype surrounding Snap has dissipated, the enthusiasm surrounding the stock has completely vanished, and even though the share price has been steadily working its way higher since the August lows, the recent strength’s gotten very little attention,” said Cramer.

The stock has rallied 30% from its lows to stabilize before its upcoming quarter on November 7th. The company had reported a huge loss related to IPO costs in May along with slow user growth. That continued in its earnings in August. Cramer thinks even though the stock has rebounded from its lows it will not be able to pare its under-performance. Their revenue grew by 589% in 2016. “Those numbers were always going to have to decelerate, but they slowed faster than investors had hoped. In the latest quarters, Snap delivered 286% and 153% revenue growth respectively, and while that’s terrific in absolute terms, it was weaker than Wall Street had been expecting,” added Cramer.

The company is burning through cash with stock-based compensation expense, marketing, R&D and operations. “Nobody had any idea when Snap would be profitable at the time of the IPO. If anything, it’s just more murky now,” added Cramer. The stock still trades at 12 times next year’s sales which is lofty compared to its peers. Also, major shareholders are holding on to the stock for a better exit point.

“Bottom line? Snap’s stock may have stabilized, but I think it’s still too soon to give this one our blessing as an investment. I’m just not wild about the risk-reward here until we get more signs that management knows what they need to do to turn the company around,” concluded Cramer.

CEO interview – Tractor Supply (NASDAQ:TSCO)

Tractor Supply just reported an earnings beat with 6.6% same-store sales. Its stock is up 20% in 2017. Cramer interviewed CEO Greg Sandfort to hear more about the quarter.

With Amazon encroaching on the retailer’s turf, Tractor Supply has to up their digital game. Sandfort said that their chains have a practice of hiring local customers who know the communities. They have increased their focus on the digital initiatives as well. “Buy online, pick up in-store has really been the key. We turned that on about a year ago. It’s doing quite well,” he added.

They have also introduced a mobile point-of-sale system that allows customers to check out anywhere inside or outside the stores. Apart from that they offer an online benefit program called Neighbors Club that allows stores to offer larger product inventories than they can physically hold by selling items online. This is proving to be a big hit. When the hurricanes hit Florida and Texas, Tractor Supply was the place to go for generators.

Viewer calls taken by Cramer

BioTelemetry (NASDAQ:BEAT): Cramer likes the company and recommended holding the stock and not panicking.

iRobot (NASDAQ:IRBT): Cramer needs to work more on the stock and thought there was a short squeeze.

Kellogg (NYSE:K): Cramer doesn’t think their upcoming quarter will be great. The yield is alright.

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