Autos And Housing Are Tepid – Cramer's Mad Money (9/11/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Tuesday, September 11.

Cramer started the show by remembering the tragic events of Sept. 11, 2001 and the collapse of Lehman Brothers. Despite that, he repeated his mantra, “There is always a bull market somewhere.” However, autos and housing are clearly not the place where the bull market resides. The companies making chips for autos and Internet of Things are doing well, along with homebuilders.

There are still many themes that are working, be it experiential economy, humanization of pets, retail stocks or cloud kings. Slowdown in autos and housing is a cause for concern nonetheless.

CEO interview – Advanced Micro Devices (NASDAQ:AMD)

The stock of AMD traded in single digits for a decade until they got a turnaround specialist, CEO Lisa Su. The stock trades at $30 now and Cramer sees it having a bright future. He interviewed the CEO to find out what lies ahead for AMD.

Su said that AMD always had great assets and technology, and it required great execution and strategy. They decided years ago not to follow the masses by making chips for mobiles and tablets and instead to invest in technologies for the future. That decision is paying off as AMD has products that differentiate and deliver value.

AMD is focused on high performance computing as it’s everywhere from automation to data centers. Su said that they have a total addressable market of $75B, which means that there is enough for everyone to prosper.

The company’s success comes with the ability to work with clients that compete with one another. “We very, very much appreciate our partnership with all of our key customers including Microsoft, for the gaming consoles,” said Su.

“I think we have a vision of where cloud computing is going and we’re working closely with them. But part of our strength is that we can work with all customers in terms of cloud customers as well as PC customers, and we can differentiate for each one of them. I think that’s what makes us unique is, you know, we’re working with both Sony and Microsoft on consoles and they both have their specific secret sauce that we’re helping them do,” she concluded.

Trade war

Cramer often questions how much investors are worried about the trade war. “Have investors stopped fearing retaliation? Do they think our governments will just make a deal so these tariffs never go into effect? What’s the logic here?” he asked.

Despite the escalating trade tensions, the market is going higher. Even the stocks tied to China are going up. Industrial stocks like Honeywell (NYSE:HON), United Technologies (NYSE:UTX) and Emerson Electric (NYSE:EMR) are going higher. Even Boeing (NYSE:BA) and Apple (NASDAQ:AAPL) went up. The action in these stocks suggested that the Chinese have more to lose than the USA.

The US economy is strong and it can afford to pay a little extra but in China, the market is falling and growth is slowing. As investors realize that tariffs are not the end of the world, it could mean that the beaten down sectors are near a bottom.

CEO interview – Toll Brothers (NYSE:TOL)

Where is the housing market headed? Who better to know than home builder Toll Brothers CEO Doug Yearley. Cramer interviewed him after the company posted a massive last quarter and despite that the stock is down 24% for the year.

Investors have been worried about rising interest rates and slowdown in luxury real estate sales, both are which key points for the company. Yearley said that the company’s earnings tell a different story. “This is the largest premium for a new home to a used home that I’ve seen in my 28 years, and it’s because the architecture’s better, the options you can put into the home are better. More and more people want new than ever before and we’re really benefiting from that,” he added.

California results were slightly weaker y/y, but it is still the company’s top market. “Last summer was very odd in that we sold more homes in the summer in California than in the spring, and everybody that follows the industry knows that the spring season is when most homes are sold,” said Yearley.

“We love our niche. The luxury end of the market is very strong. There’s more and more households that make $100,000 or more, which is our business,” added Yearly. He also said that rising interest rates and commodity prices are headwinds, but anything below a 5% interest rate is still great for home buyers.

Commenting on millennials, he said, “We know they’re marrying later, so they’re buying homes later, but that also means they’re wealthier when they buy.” Only 57% of the average first-time home buyers are married compared to 75% in 1985. That trend could lead to more millennials being able to afford Toll Brothers’ higher end homes.

The company also bought back 7% of its float in this year. Trading at 8 times earnings, Cramer thinks Toll Brothers is a steal.

CEO interview – NXP Semiconductors (NASDAQ:NXPI)

What’s next for NXPI after the failed Qualcomm bid which was shut down by Chinese regulators? Cramer interviewed NXPI CEO Rick Clemmer to find out.

Clemmer said NXPI continues to be the leading player in autonomous driving and is the leading provider of chips for autonomous systems including radar systems. He added that the domestic market for cars is not the end. “Now, the problem is, when you think about it, the car industry in China is 60% larger than the car industry in the U.S. The car industry in Europe is 22% larger than the car industry in the U.S. So looking at Silicon Valley’s number of cars may not be the absolute best indicator as to what’s going on in the car industry,” he added.

NXPI is also at the center of the Internet of Things theme as it provides inexpensive kits for any company that wants to get its devices online.

The company generates a lot of cash and rewards shareholders with stock buybacks.

Viewer calls taken by Cramer

Opko Health (NYSEMKT:OPK): Accounting irregularities equal to sell. However Cramer would want to get more clarity about the SEC charge.

Nutanix (NASDAQ:NTNX): It is one of the cloud kings and Cramer reiterated the buy.

NovoCure (NASDAQ:NVCR): The company has had a big run already and they have a great future. Cramer thinks it can still go higher.

TPI Composites (NASDAQ:TPIC): It’s an interesting company but Cramer wants to dig deeper before opining.


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