The Market Needs A Glum Index – Cramer's Mad Money (6/18/18)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Monday, June 18.

Cramer is tired of the pessimism in the market. Despite a strong economy, the negativity is weighing on the averages. He said the market might as well have a gloom index ETF which would comprise of stocks that go down every time investors are negative. Bears might as well sell it whenever they get negative. “Those of us with a little more composure might actually consider buying it or shorting the GLUM index,” he said. He discussed the stocks that would be a part of the glum index:

  • Caterpillar (NYSE:CAT): Every time Trump talks about tariffs, Caterpillar goes down. It drags the rest of the market down too. This is a cyclical company so ups and downs are noteworthy. “I like this company a lot. It’s literally doing better than ever. But as long as we keep hearing about peaking earnings and trade wars, you can’t go wrong making CAT the biggest position in the GLUM,” said Cramer.
  • Boeing (NYSE:BA): Boeing has a big business in China and every time there is trade war-related weakness, Boeing goes down. “Doesn’t matter how many times management traces out the sky-high demand or how many times I point out that China needs Boeing more than Boeing needs China,” added Cramer.
  • 3M (NYSE:MMM): Bears love to sell the stock on Trump-induced trade war-related weakness in the market. “3M has become a total pariah here, even as their products tend to be pretty beloved overseas. The sellers don’t care, which is why 3M personifies the doom-and-gloom index.”
  • General Electric (NYSE:GE): GE should be a charter member of GLUM. This industrial stock has many pain points like debt, long-term risk, pension issues, lack of capital from GE Capital. “These are all nightmares that make it a perfect fit for our Gloom index,” said Cramer. He added that their dividend cut seems inevitable.
  • Johnson & Johnson (NYSE:JNJ): Sellers are ignoring the benefits of holding JNJ as it benefits from the weak dollar and eight new drugs in the pipeline.
  • Citigroup (NYSE:C): Citigroup’s international prospects are strong but that is not reflected in the stock. “Nothing it does seems to work, even when it should. This stock wants to go down because it’s viewed as the bank with all the worst exposure everywhere,” said Cramer.
  • Goldman Sachs (NYSE:GS): Despite the business being strong, everything that the company does is perceived as wrong.
  • Lennar (NYSE:LEN): Lennar’s gloom theory makes more sense due to tariffs on imported lumber, slumping home sales and higher mortgage rates.
  • Walmart (NYSE:WMT): Just when the company took a stake in Indian online e-commerce Flipkart (FPKT), the President is wrecking world trade.
  • Ford (NYSE:F): It’s the world’s least interesting automaker.

“Here’s the bottom line: GLUM’s the word. It is all-pervasive as investors freak out about President Trump’s tough trade policies. That’s why we’ve got to have this ETF. As for me, though, I think these stocks are buys into weakness as the negativity, at last, has gotten completely out of hand,” concluded Cramer.

CEO interview – Medmen Enterprises (OTCQB:MMNFF)

Medmen Enterprises is one of the first Canadian-based retailers of cannabis to be listed on the Canadian exchange. Cramer interviewed co-founder and CEO Adam Bierman to hear what the legalization of marijuana means for them.

Bierman said the company functions in California, Nevada, New York and Florida and called the first three “horrible markets to be in”. “It’s good for business that those are tiny markets that, in the grand scheme of things, maybe matter not that much. What’s really important to understand is every market since those markets came online has been supply constrained, so limited licenses and, most importantly, especially for the Medmen’s case, the most arduous retail zoning restrictions known to man,” he added.

“Why can’t you build a billion-dollar business in this industry? Why not? Why can’t you take the biggest U.S. weed company and make it public and available for people to own all over the world? Now, there’s a lot of roadblocks in that kind of an attitude and we can’t list here in the U.S., so we have to list in Canada and, unfortunately, that’s the only place to go. Now, fortunately, it is a place to go and they’ve been great partners,” said Bierman.

When marijuana becomes mainstream, there will be more stores. Some of the company’s stores in California bring in more than $20M in revenue.

Enterprise software stocks

The enterprise software market has been hot in 2018. Many stocks like Carbon Black (NASDAQ:CBLK), DocuSign (NASDAQ:DOCU), Pivotal Software (NYSE:PVTL), Zscaler (NASDAQ:ZS) and Zuora (NYSE:ZUO) have gone up since their IPOs. However, none of these companies have made profits and their valuations have ballooned up.

As trade tensions and interest rates rise, investors are looking for secular growth themes and enterprise software has scarcity of stocks. Almost all of these companies beat expectations in their first earnings since IPO. “Here’s the thing: when you bet on any of these red-hot enterprise software IPOs, you’re effectively betting that the companies will be able to keep beating the estimates. And while I like this sector a lot, these are, by any means, sky-high valuations. Now, that must make you more cautious,” said Cramer.

If any of these companies miss earnings, they will be crushed. It’s time to book profits on these companies even as Cramer is a fan of Zuora and Coupa Software. These stocks were likeable when they were much lower.

Off the tape

Cramer went off the tape to review the privately-held digital ordering system provider for restaurants – Olo. Cramer interviewed founder and CEO Noah Glass to find out what lies ahead.

Glass came on Mad Money in October 2015 and they were supporting 12,000 locations on their platform. That number exceeds 48,000 today and the future looks strong as orders wroth $200B will be shifting from in-store to online.

The strength comes from “more consumers getting the app, more consumers getting comfortable using on-demand services, thinking about the app as a remote control for buying things,” said Glass. They have also partnered with Amazon which will boost digital ordering further as it is already growing at 31% Y/Y at its existing clients.

“Everybody wants to get things delivered faster. It used to be that two-day delivery was fast enough. I mean, what if you could get things delivered same hour? For 13 years, we’ve been working with an industry that demands on that kind of speed,” said Glass. That led to the creation of ‘Dispatch’.

“What Dispatch does is it coordinates the prep of the order with the driver coming to collect the order and, on average, it’s a 12-minute delivery time from the store to the door. So now we’re opening that up for all retailers, not just restaurants, and allowing retailers to compete with online retailers on convenience by delivering same hour,” he concluded.

Viewer calls taken by Cramer

Portola Pharmaceuticals (NASDAQ:PTLA): It’s down 14% for the year but Cramer likes it. He cautioned that it could be speculative.

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