Don't Give Up On Industrials – Cramer's Mad Money (6/21/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Thursday, June 21.

When others sell out of panic, that is the time to buy. This is the case with industrial stocks which have taken a beating on trade and tariff fears. 3M (NYSE:MMM) has fallen from a high of $259 in January to $195. At $170 a share, 3M will yield 3.2% and trade at 16 times earnings. This is the time to buy and the time to worry was in January. They have a good buyback program and a strong balance sheet.

United Technologies (NYSE:UTX) is another good stock that is off $16 from its highs. It has a breakup plan that will unlock value for shareholders. DowDuPont (NYSE:DWDP) has come down and has similar plans to unlock value. Cramer thinks all these stocks have priced the worst-case scenarios. Also, there could be a compromise on world trade. It’s time to buy when everyone has given up and that’s why Cramer’s trust sold Darden Restaurants (NYSE:DRI) on strength.

Intel (NASDAQ:INTC) was also down 2.3% on CEO’s resignation for violating the company’s non-fraternization policy. “What matters to me is that the stock is now too cheap to be ignored because at the same time they released the Krzanich news, they also told you that business was better than expected thanks to strong growth across all segments. The stock looks good to me,” said Cramer. Intel’s Q1 was also good with growth from Data Center Group.

Bank stocks look good to Cramer as they should clear the stress tests next week and that will allow dividend boost and buybacks for shareholders. “When you get to levels where it looks like it’s all over but the shouting, when everyone else is giving up, that’s when you know that your conviction will begin to pay off,” he concluded.

While Cramer thinks industrial stocks might not have bottomed and they could go down lower, but the investment thesis of strong industrials is still intact.

Micron Technology (NASDAQ:MU)

Micron reported a strong quarter and upside guidance. After listening to the conference call, Cramer is less skeptical about the prospects of Micron than most analysts were at the call. As the company raised their EPS guidance to $3.30/share, analysts were still negative. “The analysts, almost to a person, expressed tremendous skepticism about Micron’s end markets. They still seem to believe that what matters is the personal computer, long the dominant end market, and one that’s perceived as having no growth,” said Cramer.

The company sells at 4.7 times next year’s earnings, making it the cheapest stocks in the S&P 500. Analysts keep focusing on the PC business. “The PC ain’t bad, but all of Micron’s other businesses are growing much faster,” said Cramer. “Micron took pains to say, over and over again, that its chips are anything but commodities now, that they’re solutions. That seems to fall on deaf ears,” he added.

In other strengths, Micron has $2.2B in free cash flow, a debt reduction plan and $10B buyback program. “How much more is that earnings power worth to you if it’s coming from the most complicated cellphones or the amazing data centers that support the cloud and artificial intelligence?” asked Cramer. He is still a believer and the stock is worth the risk.

Off the tape

Cramer went off the tape to review the privately held Zume Pizza. The company makes pizza using automation and robots and delivers it in 5-20 minutes. Cramer interviewed chairman and CEO Alex Garden to know more.

Garden said that automation is not a complete job killer. His company uses high-tech trucks to deliver food. “Not every job is a great job. If you own 10 restaurants and you’ve got 10 people working in each restaurant, you’ve got 100 people. In the Zume model, you’ve got a high-speed, co-botic commissary. Co-botic people and robots working together,” he added.

The robots make pizza with human supervisors. The food is loaded into the truck with built-in ovens and is heated on the way to the customer to save on delivery time. The truck can make 120 pizzas an hour.

Garden said that employment is not being killed with automation. “They get full benefits, they’ve got great job prospects. When we automate a task – boring, dangerous, repetitive task – we promote that person. We don’t get rid of them,” he added.

CEO interview – Okta (NASDAQ:OKTA)

The stock of cybersecurity company Okta is up 107% in 2018 and trades at 16 times sales. They build software to make logging into cloud networks more secure. Cramer interviewed co-founder and CEO Todd McKinnon to know what lies ahead.

“I think the big advantage that our approach has against someone like Microsoft is that we don’t have a horse in the race in terms of which applications or which operating systems or which type of computer our customers use,” said McKinnon. They have 4,000 customers like JetBlue and Adobe which includes a multi-factor authentication platform focuses on protecting identities.

“We connect everything. Microsoft is going to be inherently biased towards the Microsoft stack – Azure, in the server, on the cloud, the Windows server, Windows on the device, Office 365, in the app – and anytime you go out of that, the choice is limited. And we’re all about choice and neutrality and letting customers choose the best technology for their company. And I think Microsoft has a little bit of a different bias,” said McKinnon.

Their platform is device agnostic which means people can connect to companies from any device or operating system.

Viewer calls taken by Cramer

Wynn Resorts (NASDAQ:WYNN): Don’t worry about the lawsuit. Macau is doing good. Cramer prefers MGM Resorts (NYSE:MGM) over Wynn.

Lululemon Athletica (NASDAQ:LULU): The stock has run up a lot. Wait for it to come down before buying.

Southwest Airlines (NYSE:LUV): The oil is peaking. This is one of Cramer’s favorite airlines.

Lam Research (NASDAQ:LRCX): The stock is going down on the perception that business is not strong because competitor Applied Materials (NASDAQ:AMAT) said so.

SAP (NYSE:SAP): Don’t bet against the stock.


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