Negativity Is Not Good For Stocks – Cramer's Mad Money (4/9/18)

15 sectors that remain unaffected by trade war.

Golf exposure is a long-term theme.

Don’t sell First Cash Financial Services.

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday, April 9.

The market had upside surprises on Monday. “Look, this market is crazy, but this morning we saw how a series of unexpected positives can send stocks soaring, and that’s worth keeping in mind now that the Mueller investigation is making things even more chaotic,” said Cramer. Traders awaited news about Chinese retaliation to Trump’s tariff but that did not happen. Instead, China banned exports to North Korea of materials tied to weaponization.

Investors got negative on M&A as well, due to the uncertainty in the market. But Novartis’ (NYSE:NVS) $8.7B acquisition of AveXis (NASDAQ:AVXS) was welcome news in the M&A space which led to AveXis jumping 82%. “Suddenly biotech, which had been among the worst of the sectors out there, justifiably came roaring back with a vengeance,” added Cramer.

He suggested focusing on individual companies and the upcoming earnings season. There is always a better time to sell and that is not during the selloff. “Here’s the bottom line: President Trump’s trade dispute with China is not the be-all and end-all of this market. I think there’s simply been a vacuum of news about actual earnings and takeovers, so the endless negatives from Washington were allowed to take center stage,” concluded Cramer.

Sectors unaffected by Trump’s tariffs

As the US-China trade war heats up, Cramer came up with a list of 15 sectors and stocks that will remain unaffected by the trade war battleground.

  1. Telecom: Stocks like AT&T (NYSE:T) and Verizon (NYSE:VZ) and smaller players like CenturyLink (NYSE:CTL) even though its yield looks like a red flag.
  2. Mall-based retailers and apparel makers: The retail stocks with high domestic exposures and apparel makers are seeing traction over the past 5-6 months. “What about retaliatory tariffs on big-name American brands with a lot of Chinese exposure like Nike (NYSE:NKE)? Well, the buyers sure don’t seem scared. It’s one of the best-performing stocks in the Dow,” said Cramer.
  3. Cloud stocks: Typical cloud names like Adobe (NASDAQ:ADBE), Salesforce (NYSE:CRM) and Splunk (NASDAQ:SPLK).
  4. Cell towers: Cell tower operators like American Tower (NYSE:AMT), Crown Castle (NYSE:CCI), and SBA Communications (NASDAQ:SBAC) are worth buying into any major marketwide sell-off.
  5. Health insurers and hospital stocks.
  6. Domestic oil stocks like Marathon Oil (NYSE:MRO), Hess (NYSE:HES), Pioneer Natural Resources (NYSE:PXD) and Anadarko (NYSE:APC).
  7. Oil refiners stocks would make a good buy on a China-induced downturn.
  8. REIT stocks as interest rates are not surging higher. “When the Chinese trade issues surfaced and rates started going lower, it made these high-yielders more attractive,” said Cramer.
  9. Utilities that have no ties to MLPs.
  10. Restaurant stocks.
  11. Brokers stocks tend to trade up after interest rate hikes.
  12. Cybersecurity stocks: “The cybersecurity stocks are natural hedges against China, North Korea and Russia, the big three state sponsors of cyberterrorism,” said Cramer.
  13. Business operators like Robert Half (NYSE:RHI), Automatic Data Processing (NASDAQ:ADP) and Paychex (NASDAQ:PAYX).
  14. US-based homebuilder stocks.
  15. Defense stocks.

“These all are under-owned sectors. They all go down big every time we get a large S&P 500 sell-off. But unlike so many other companies, they’ll be going down for no fundamental reason, which is why you can rationally buy them into weakness like we had in the last hour of today’s trading,” concluded Cramer.

Golf stocks

If you are looking for a long-term theme with staying power, take a second look at the gold business. “I know that golf isn’t exactly the pinnacle of excitement. It’s not sexy. Some argue it shouldn’t even be a sport. The Masters had some massive ratings, though, especially when Tiger Woods was playing earlier in the tournament for the first time in years,” said Cramer.

Cramer noticed that gold started a comeback in 2016 with 2 stocks performing well – Callaway Golf (NYSE:ELY) which makes all sorts of golf-related products and owns a stake in fast-growing driving range operator Topgolf, and Acushnet Holdings (NASDAQ:GOLF), which is the parent company of highly respected golf brands Titleist and FootJoy.

Callaway Golf has gained 45% since 2016 and 15% since Cramer recommended it 6 months ago, but Cramer thinks he should have had more faith in Acushnet. “I should’ve had more faith in them. Since then, the company has found its footing and the stock has caught fire. It’s up a quick 12% since the beginning of 2018,” he added.

With the return of Tiger Woods, TV ratings were up over 90% Y/Y. However strength in the golf business is much more than just one player. Callaway’s earnings in the last two quarters showed that it has gained market share in every business that it operates. “Put it all together and I think Callaway still has an excellent story. To me, the stock seems fairly cheap, trading at 21 times next year’s earnings estimates with a 30% long-term growth rate,” said Cramer.

Acushnet also looks like a bargain trading at 14 times earnings but it has an uglier balance sheet compared to Callaway. However, Cramer’s golf recommendation of EPR Properties (NYSE:EPR), which owns real estate that houses Topgolf driving ranges, did not do well with the stock being down 22%. “The takeaway is straightforward, though: if you want exposure to the burgeoning bull market in golf, forget the diversified companies with a bit of golf business and just buy yourself a pure play like Callaway or Acushnet,” he concluded.

CEO interview – Magellan Midstream Partners (NYSE:MMP)

Cramer has been recommending the stock of Magellan Midstream Partners but it’s down 14.6% in the year. He interviewed chairman and CEO Michael Mears to hear what lies ahead for them.

Mears said that the company has doubled their cash flow in the last five years and they have the best balance sheet in the pipeline operators with new projects worth $1.4B.

Commenting on the FERC tax rule change, he admitted that it caught the industry by surprise, but he expects the impact to be minimal. Magellan is still rooting for 8% growth in the current year with 5-8% in the next two.

Viewer calls taken by Cramer

First Cash Financial Services (NASDAQ:FCFS): “No, there is no need to exit the stock.”

CBS (NYSE:CBS): Cramer does not like CBS.

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