Game Plan For The Week – Cramer's Mad Money (9/7/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Friday, September 7.

The jobs report was good on Friday, and the President used it to escalate trade tensions with China. “Why does this matter? Because the President’s predictability on trade has created a ‘good news is bad news’ dynamic. Good news for the economy causes the White House to ratchet up trade tensions, which is viewed as bad news by the stock market,” the Mad Money host said.

He said he expected China to respond over the weekend, and that does not bode well for Monday. “Be ready for a bit of a sell-off. Might be a good buying opportunity if the pain spreads beyond the Chinese-focused stocks,” he added. With that, Cramer discussed his game plan for the week.

Monday

Cramer said he will be watching for China’s response to trade tariffs.

Sonos (NASDAQ:SONO) will be reporting earnings, and Cramer is critical of the company due to no consistent history of profitability. He is not a fan, he noted.

Tuesday

Economic data from allies such as Germany’s ZEW survey, Japan’s growth index and the U.K.’s labor report will be out. “Believe me, I don’t want to have to pay attention to any of this stuff. But when you’re in a trade war with pretty much everyone in the world – and that is the situation, don’t kid yourself – you want to know what kind of cards the other side is holding,” Cramer said.

Wednesday

With V.F. Corp.’s (NYSE:VFC) analyst meeting on Wednesday, the question around spin-off of the company’s underperforming jeans division will be answered. “I think the stock’s worth buying ahead of the meeting. I’m betting management tells a good story about how the breakup will actually create value,” added Cramer.

The PPI number will be out on Wednesday. “We’re not going to like many of these numbers going forward, because when you combine a roaring economy, which we do have, with new tariffs, you get a toxic inflationary brew that the Fed must feel compelled to stop – and the way they do that, of course, is by raising interest rates,” he said.

Thursday

Kroger (NYSE:KR) will report earnings on Thursday. With no tariffs on its products, the company could deliver a good report. “Like so many other retailers, they actually figured out how to listen to their customers and get them the products where they want, when they want, how they want,” Cramer observed.

United Parcel Service (NYSE:UPS) will hold its analyst meeting, and Cramer called it the most important for the year. “UPS is a terrific e-commerce winner. It would be a mistake to ring the register ahead of this. As a matter of fact, you might want to buy some before and maybe buy some after,” he said.

The CPI numbers would be out on Thursday, and that, along with PPI, could push Fed to raise rates.

Friday

Dave & Buster’s Entertainment (NASDAQ:PLAY) will report earnings, and Cramer has been a fan of the company. It has been a consistent winner. “If you own a strip mall, you can swap out one of them losers for a Dave & Buster’s and that’ll bring in a lot more traffic for the whole place. I expect a good number,” Cramer noted.

“I think there are better places to invest at the moment. You want domestic companies with even less international trade exposure. Tech is not immune,” he concluded.

CEO interview – Green Thumb Industries (OTCPK:GTBIF)

Green Thumb Industries is a Canadian-based cannabis retailer gaining traction in the US. Cramer interviewed CEO Ben Kovler to find out what lies ahead for the company. Kovler said that cannabis is at an inflection point in Illinois, as patients on opioids can shift to medical cannabis given it’s not addictive and reduces pain as well.

Green Thumb is not interested in states with unlimited licenses such as California, but in states like New York, where the company holds one of the 10 licenses in the state. He adds that only 50% of the cannabis is smokes, while the other half is being added to branded products which will be coming to store shelves.

Cramer said this is the right time to consider the growing cannabis industry, and that Green Thumb’s stock is speculative in nature.

Execution

When it comes to business, execution is the key. If a company fails to execute, the stock plummets. On the other hand, for companies that execute well despite poor expectation from the Street, those stocks are handsomely rewarded.

Broadcom (NASDAQ:AVGO) is one such company that has executed well. The stock went down after the failed Qualcomm (NASDAQ:QCOM) deal, but the company did not stop. Instead, it purchased a mainframe software company for ~$18 billion, and that deal boosted Broadcom’s earnings and balance sheet as was evident from the latest quarter, after which the stock moved up 8%.

The same case applied to Five Below (NASDAQ:FIVE), which crushed the Street’s expectations to deliver a great quarter and touched its all-time high.

On the other end of the spectrum is Tesla (NASDAQ:TSLA), which has failed to execute. The company has been in the news for the wrong reasons; most recently as it was hit by a slew of executive departures. If that was not enough, CEO Elon Musk was seen smoking a joint in a live YouTube discussion with podcast host Joe Rogan. While legal in California, marijuana is still a crime under federal law, and the CEO of a public company should not be seen doing it in public. This only brings more scrutiny on Elon Musk. The company’s bonds due in 2025 hit all-time low after the news.

CEO interview – S&P Global (NYSE:SPGI)

The stock of ratings agency S&P Global is up 22% for the year. Cramer interviewed CEO Doug Peterson to learn what’s next for the company.

Peterson said that 10 years after the financial crisis, the company is putting processes in place to ensure it does not happen again. “One thing that’s interesting that we’ve added in from those days is ways to connect the dots. We have ways that our sovereign analysts, our financial analysts, our corporate analysts, energy, commodities, etcetera – they get together and they talk, not just in the region, but also globally,” he added.

S&P Global’s financial services division paid a $1.3 billion fine in 2015 to settle a lawsuit that accused the division of defrauding investors using inflated ratings that miscast the credit risks associated with mortgage-backed securities. Peterson said the company has 1,500 analysts across the globe being more diligent about looking for worrisome trends.

“We look for credit indicators, we look for credit bubbles, we look for credit risk. And this is something so that it gets then built across the entire practice,” he added. They have also been involved with China despite the trade disputes.

Most of the corporate debt in China is on bank balance sheets, including the loans and bonds. “They need to start incorporating themselves into the global economy and that means they need to have a bond yield, they need a yield curve, they’ve got to have a credit risk curve, they have to open up their capital account,” the CEO added.

The company’s transactional and subscription-based products are being enhanced with new data and capabilities.

Viewer calls taken by Cramer

Universal Display Corporation (NASDAQ:OLED): It is one of the hardest stocks to trade, as it’s hard to understand what Apple (NASDAQ:AAPL) will do with it.

The Trade Desk (NASDAQ:TTD): The company had a good quarter, and Cramer thinks the next one will be good too.

Floor & Decor (NYSE:FND): There are better stocks like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW).

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