FANG Stocks Have Ignited A Rally – Cramer's Mad Money (5/10/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Thursday, May 10.

The market has been seeing negativity and selloff in the recent past. However, the non-believers have been converted to believers now. How did this happen? All it took was great earnings, low expectations and skepticism combined with low inflation.

Facebook (NASDAQ:FB) was seeing a selloff due to the scandal. However, just after the apology before Congress and a short squeeze combined with good earnings, Facebook rallied.

Next stock was Amazon (NASDAQ:AMZN) which did not have a good April. As the company announced it has 100M paying prime subscribers and reported good earnings, the stock caught fire.

Lastly, Apple (NASDAQ:AAPL) went down on fear of slowing iPhone sales. When the company delivered earnings, everyone was proven wrong. More so, Warren Buffett raising his stake in the company led to the stock rallying. Cramer’s trust owns the stock of all three companies.

“Now the real fear on Wall Street is not of losing money. Instead, they’re afraid of missing out on the rally, and without any big earnings reports on the horizon, you can’t blame the skeptics for changing their minds. When the bulls stampede, you either join the rush or you get trampled,” concluded Cramer.

CEO interview – Groupon (NASDAQ:GRPN)

The stock of online deal company Groupon went up 6% on good earnings. Cramer interviewed CEO Rich Williams to know more about the quarter.

Williams said Groupon has reinvented itself and the customers love it. They are using the machine learning to improve customer experience and speed customer service inquiries.

The company has good inventory and partners. They recently partnered with GrubHub (NYSE:GRUB) and Major League Baseball to sell tickets and have items delivered to the doorstep. The company has more than 50M active users.

Inefficient oil market

The oil price has hit $70s. Cramer recalled the moment from 2008 as a teaching for investors. The US economy was going in recession but the world was still strong. Foreign demand for oil coupled with instability in Middle East and Africa sent the oil prices up to $147. “But what happened after that shows you just how fragile, skittish and easily manipulated the oil market is because the price of crude collapsed pretty much in a straight line to $31,” said Cramer.

This was pure manipulation. “It was almost as though there was no spare capacity to sell. But, of course, that turned out to not be true. There was tons of spare capacity. The new supply just couldn’t be ramped up fast enough. But when it did, the market collapsed,” added Cramer.

The oil market is inefficient and it takes years for the supply to re-balance itself. That’s what is happening currently. However, investors have become wary of oil futures. They know oil traders buy crude on bad news even if there is less demand.

Don’t trust the spike in oil prices. “But we know the futures aren’t necessarily the real deal and that’s keeping investors in the stock market from panicking out as we watch the price of crude climb inexorably higher. I think that’s the right attitude,” concluded Cramer.

Biotech

Cramer recommended the four horsemen of biotech sometime ago – Biogen (NASDAQ:BIIB), Celgene (NASDAQ:CELG), Gilead (NASDAQ:GILD) and Regeneron (NASDAQ:REGN). What have these stocks done since then? Biogen is down 14%, Celgene down 21%, Regeneron down 23% and Gilead down 9%. “Last year it seemed like these stocks were mounting a comeback, but lately, they’ve once again been sent to the glue factory,” said Cramer.

Cramer thinks most of the weakness in the sector is justified but they could be getting too cheap to ignore. “The economy’s just too strong. When business is tepid, biotech is loved. When business is great, biotech is ignored. Who wants consistent, steady-eddie growth when the industrials can produce huge, year-over-year earnings increases?” he asked.

These companies are not the powerhouses they used to be. Gilead and Celgene have made big bets on cancer treatments, but it will be years before anything comes to the market. Cramer is bullish on Biogen and Regeneron as they are cheap with PEs of 11 and 14. The outlook for them is not bad and they should not be trading like value stock.

CEO interview – BioMarin Pharmaceutical (NASDAQ:BMRN)

BioMarin had good earnings but what’s in their pipeline. Cramer interviewed CEO Jean-Jacques Bienaime to find out.

Bienaime spoke about their latest drug Pegvaliase for the treatment of adults with phenylketonuria who have inadequate blood phenylalanine control despite available treatment. The market for this drug is just 26,000 patients and the current treatment which is also from BioMarin costs $150,000. Bienaime expects the drug to ramp up slowly as it requires education for clinics and patients.

Their next drug is a gene therapy for hemophilia, which affects 120,000 patients. Their goal is to just have one injection that lasts a lifetime, but they have just two years of data to support it.

Viewer calls taken by Cramer

Kansas City Southern (NYSE:KSU): It is levered to NAFTA. It’s a well-run company and Cramer would like to hedge the bet and go with Norfolk Southern (NYSE:NSC).

Annaly Capital Management (NYSE:NLY): Cramer doesn’t like the stock as it’s an opaque company.

Ford (NYSE:F): It may be a value trap.

Freeport-McMoRan (NYSE:FCX): It’s still controlled by Chinese demand, and their last quarter was horrible. Don’t touch it.

Which investAble sector is lagging behind? Cramer thinks the airlines sector is just one upside surprise away from igniting.

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