Game Plan For The Week – Cramer's Mad Money (10/6/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Friday, October 6.

Stocks pulled back after weak nonfarm payroll numbers on Friday, but some high growth stocks have still rallied too far. “Here’s all I ask. The highest valued stocks are now making the big moves; so I’m begging you to do something for me: if you’re going to own these stocks. Please know what you’re buying,” said Cramer. The S&P500 is in the overbought region and Cramer thinks investors should be ready for a correction so they can buy good stocks at lower prices. He did not imply selling but instead booking partial profits and raising cash.

With that, he discussed the game plan for the coming week.

Monday

US banks and bond markets will be closed on Monday but Europe will be open. Cramer will be watching the German industrial production number which could play on the momentum of a weaker US dollar.

Tuesday

There are analyst meetings from Tech Data (NASDAQ:TECD), Wal-Mart (NYSE:WMT) and Workday (NYSE:WDAY) along with the proxy vote on Procter & Gamble (NYSE:PG).

Wal-Mart, in its analyst meeting, should address how it will compete with Amazon (NASDAQ:AMZN) via its Jet.com business. A positive note from Tech Data will be good for the entire sector. Lastly, Workday will talk about its cloud value play which is focused mainly on human capital and financial management.

Tuesday will see the final of the proxy battle between Procter & Gamble and activist Nelson Peltz, who wants a seat on the board of directors. Cramer thinks the stock will go down if Peltz loses the vote as investors view him as the symbol of change.

Wednesday

The analyst meetings continue on Wednesday from Kroger (NYSE:KR) and Western Digital (NYSE:WDC).

Kroger has to give its strategy of fighting competition from Amazon. “The quarters have been weak there. I don’t know if they’ve got a strategy,” said Cramer. On the other hand, Cramer expects Western Digital to talk about Toshiba (OTCPK:TOSBF). “What I really think matters here is the pricing of their products, namely how much is Western Digital getting for its disk drives and flash memory chips. That alone could be a killer given that there’s so much hot money in the stock,” he added.

Thursday

Citigroup (NYSE:C), JPMorgan (NYSE:JPM) and Domino’s Pizza (NYSE:DPZ) will report earnings on Thursday.

Cramer expects good numbers from Citi and news about its stock buyback. JPMorgan will report good earnings and yet it trades at just 14 times earnings. “If JPMorgan can break through $100, then we’ve got some very good leadership to go to the next level. Given that most people now expect the Fed to raise interest rates in December, it’s likely that this stock will get there on any positive commentary by CEO Jamie Dimon,” said Cramer.

He thinks the report from Domino’s will be different from last time when international sales dipped. “I think it’ll be shallow. Why? Because CEO Patty Doyle delivers and I don’t think you want to fight the trend of Domino’s, which is still very inexpensive given its humongous cash flow,” he added.

Friday

Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) will report earnings.

Cramer thinks Bank of America will report strong earnings as it has the biggest deposit base. Rise in interest rates impacts their bottom line directly. Wells Fargo, on the other hand, is scam-ridden but it can join the bank rally, if there’s one.

“I don’t want to over-dramatize my concerns here, but I have to tell you this market has been so unbelievably strong that it’s natural to believe that there will be some profit-taking if the earnings aren’t perfect when they start next week,” concluded Cramer.

Know your IPO

In the ‘Know your IPO’ segment, Cramer reviewed the new public company Switch (NYSE:SWCH). It’s the second largest tech IPO of 2017. “After digging into this story, I think the pros do outweigh the cons, although I’m obviously not alone in believing that, as the stock surged from $17, where it came public up to $20.84. That’s a 22% gain right out of the gate. Which begs the question: is Switch worth owning even after today’s monster move?” said Cramer.

They offer advanced data centers with patented cooling systems and powerful machines equipped to handle sensitive and complex business data. They have solid clients like Amazon and eBay. 95% of the company’s revenue is recurring, which means it offers data centers as SaaS. It is a profitable business. “The fact is this is a pretty lucrative business. I told you I love the data center. However, while Switch is intriguing, it also has some issues that we’ve got to address here,” said Cramer.

Their ownership structure is complicated as founder Rob Roy owns 67.7% of voting power, whereas the public owns less than 5%. “It’s never a good thing when you have a multi-tiered ownership structure, with the owners of the common stock being treated as second- or third-class citizens,” he added. The company also gets 38% of its revenue from just 10 clients from which eBay accounts for 10%. One should not be dependent on a single customer but the data center business is sticky.

The company is clustered in Las Vegas currently and this is an issue. It plans to open a new data center campus in Atlanta which is positive news. However, no matter how promising the business looks growth-wise, it is trading at a lofty valuation of 76. “In the end, though, the stock is simply a little too rich for me right now to recommend. That said, call me a believer in the concept. Just not the price,” concluded Cramer.

Celgene (NASDAQ:CELG)

The stock of Celgene fell on the news that Amazon is looking to enter the pharmaceutical sector. “So I consider it my job to point out when we’re getting a nice buying opportunity in the stock of a high-quality company if they ever occur,” said Cramer. He added that the market should consider the decline in the stock as a gift as Celgene has rebounded every time after selling off.

The stock is up 34% in the last 12 months but it fell on analyst downgrades. Analysts are concerned about the competition from generic versions of Celgene’s flagship drugs and its 2018 pipeline. Cramer thinks the concerns are overblown as its three main patents expire by 2020 and by then the company would have made enough money on the drugs. Celgene also claims that it stand to make $14B in peak sales from its pipeline. Successful clinical trials will lead to the stock rising again.

“When a high-quality stock like Celgene gets slammed but the underlying thesis is still intact, I think you need to do some buying.”

CEO interview – Marriott Vacations (NYSE:VAC)

The stock of Marriott Vacations is up 31% since February. Cramer interviewed CEO Steve Weisz to find out what lies ahead.

The company has 25 resorts and sales centers in hurricane-hit areas and all but two resorts are ready to be open again. One of the two resorts may open by December but the other one will take longer as permanent power is an issue.

Weisz said that the typical timeshare owners may not be millennials, but the data suggests a different scenario. “According to some interesting statistics not only that we see, but also through the Timeshare Trade Association and the American Resort Development Association, the number of Gen X, Gen Y and millennials continues to grow as a percentage of the new-owner buyers that are coming into the marketplace,” he added.

“While I think the traditional belief is that this is somewhat of a ‘boomer’ product, I believe that the statistics are proving that not to be true at all,” he said. The consumer appetite for vacations is still intact even after a damaging hurricane season. “We’re very bullish about what we think the future to be, and we believe that the demand for vacationing, particularly in quality properties such as ours, is as good as it’s ever been,” added Weisz.

Cramer asked about the M&A chatter that the company is looking for ILG (NASDAQ:ILG). “We have a policy and a practice not to comment on speculation, so I’m afraid I can’t give you any color one way or the other on that. But, you know, stay tuned,” dodged Weisz.

Viewer calls taken by Cramer

Northrop Grumman (NYSE:NOC): Wait for the stock to decline 5% before buying as it’s at a 52-week high.

Shopify (NYSE:SHOP): Cramer thinks there are concerns in some portions of their business and one should be cautious before committing more money.

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