Texas Rebuild Will Benefit Stocks – Cramer's Mad Money (8/30/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, August 30.

“We’ve got to take a step back and look at the bigger picture here, because that’s what helped power today’s rally,” said Cramer. The main move was due to the rebuilding of Texas after Hurricane Harvey. “While Harvey has been a real tragedy for the millions caught in its path, the natural disaster hasn’t been accompanied by any man-made catastrophes like we saw during Hurricane Katrina. Trump’s visit to Texas didn’t turn out to be a fiasco,” he added.

Texas is a largely Republican state and Cramer thinks billions of dollars will be given to the state for rebuilding. This will help homebuilding materials companies like Weyerhaeuser (NYSE:WY), Louisiana-Pacific (NYSE:LPX) and USG (NYSE:USG), road aggregates like Martin Marietta Materials (NYSE:MMM), wheelhousing and roofing companies like Owens Corning (NYSE:OC) and Beacon Roofing (NASDAQ:BECN).

The reclamation project will be enormous. There could be a spike in auto-sales as 0.5M vehicles are expected to be damaged. “Can they be replaced? Of course, because they have insurance, which means there will be lots of new orders,” said Cramer. President Trump’s visit to Texas and the message was hands-on and a boost for the market. The 3% GDP growth with almost no inflation is working well for the markets too.

“The bottom line: President Trump, you want higher stock prices? You focus on the country, all of the country, as it attempts to help America’s fourth-largest city get back on its feet again,” concluded Cramer.

M&A season

There is a post-Labor Day boom coming for M&A. “It’s pretty simple: the upward movement in the stocks of the acquirers is going to drive the takeover bus,” said Cramer.

The market liked Gilead’s (NASDAQ:GILD) takeover of Kite Pharma (NASDAQ:KITE). They are putting the money from the Hepatitis C cure to use by buying the company. “The market-cap gain is nearly what they spent for Kite, even as there’s little hope that Kite can boost earnings for at least three years. This purchase has started the chatter that Celgene (NASDAQ:CELG) will buy Bluebird Bio (NASDAQ:BLUE), which is working on some promising anti-cancer gene therapies. As with the Gilead-Kite deal, both Celgene and Bluebird have been moving up. It’s a virtuous circle.” said Cramer.

There is chatter about United Technologies (NYSE:UTX) buying Rockwell Collins for ~$20B. The stock of UTX was up on the news. “All these names demonstrate one salient fact: if the acquirers’ stocks move up after news of a deal, well, then a heck of a lot more companies will make acquisitions,” he added.

“I think corporate America has finally given up on our dysfunctional government and is now going full speed ahead on acquisitions. Ripe areas? Drugs, aerospace, even oils, if the price of oil were to drop to the low $40s where I think it’s headed,” he concluded.

CEO interview – Hain Celestial (NASDAQ:HAIN)

The grocery sector has been highly competitive and the stock of Hain Celestial is up 6.7% YTD. The company reported good earnings after which the stock rallied. Cramer interviewed CEO Irwin Simon to hear more about the quarter.

“I went through a year of hell. In 24 years at Hain, 2017 was one of my toughest years ever,” said Simon referring to the accounting scandal. “At the end of the day, we came out a much stronger company. And as you go in as deep as we did and you look at the company, you say, ‘Hey, we’re not so bad at all.’ What you learn is this here: it’s all about your brands and your people,” he added.

The consumers going to brick & mortar retailers want healthier food. More than 30% of organic food is bought online and that’s where the growth is. The Amazon-Whole Foods deal will benefit Hain. “Something that Hain has not done is invested into the consumer the way we’re going to do it this year. We’re going to spend $50M investing in the consumer to bring that millennial in to connect to our MaraNatha brand, to our Earth’s Best brand, to our Sensible Portion brand. And that’s a big expenditure we’re going to make on the consumer,” said Simon.

Activist Engaged Capital took a stake in the company and Simon said they welcome all shareholders as long as they do not distract the company’s mission. “And if Engaged has great, independent board members, I’m open to it. The last thing I’m open to is a distraction from the company, to get into some type of proxy fight. It’s about moving forward and investing in our brands and returning to our shareholders,” he concluded.

CEO interview – Workday (NYSE:WDAY)

The stock of finance and HR services in the cloud provider Workday is up 62% YTD. The company reported strong earnings and Cramer interviewed Aneel Bhusri to find out what lies ahead.

The company got new high-profile clients like Citigroup, Siemens and Shell. “Our math is that 30% of the Fortune 500 has chosen Workday. 50% of the market of those Fortune 500 companies haven’t made any decision yet. So from our math, we’re the clear leader in the Fortune 500 segment and likely in the Fortune 50 segment as well, but there’s still a lot of market opportunity in front of us,” said Bhusri.

He added that they have a great sales team in Europe and presence around the globe. Though they are a leader in this space, there are many opportunities ahead.

When asked about competition with peers, Bhusri said, “In places we compete and [in] places we partner. I think a fair comparison for ADP is candidly, SAP and Oracle. You have to look at other companies that have to deal with legacy software and generations of old technology and it’s a challenge to overcome that.”

Viewer calls taken by Cramer

Ford (NYSE:F): Cramer cannot recommend Ford right now.

Analog Devices (NASDAQ:ADI): It has not done going up. Buy it.

HP Inc (NYSE:HPQ): Cramer likes the stock.

Bristol-Myers (NYSE:BMY): “Something is going on that we don’t know.”


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