Today was a decent session on Wall Street, despite the red-hot consumer price index, but Jim Cramer told his Mad Money viewers Friday that the rally could be premature given the Federal Reserve meeting ending next Wednesday.
Cramer’s game plan for next week revolves around what Fed chair Jay Powell will say on Wednesday. We all know interest rate hikes are coming, we just need to hear the timetable and whether they’ll be lock-step or data dependent. Either way, the markets are likely to freak out, but a data-dependent Fed would signal a buying opportunity.
Before that, on Monday, Cramer will be listening to what Regeneron (REGN) – Get Regeneron Pharmaceuticals, Inc. Report says at their investor day. He’s expecting to hear a strong story.
Next, on Tuesday, Campbell Soup (CPB) – Get Campbell Soup Company Report will hold an analyst meeting and Cramer said he needs to hear about innovation that can help the company raise prices to offset input costs. He’s not holding his breath.
In addition to the Fed, we’ll also hear from Lennar (LENNAR) and Eli Lilly (LLY) – Get Eli Lilly and Company Report on Wednesday. If the Fed’s comments are good, Lennar is a buy. Cramer liked Eli Lilly’s long-term prospects either way.
Continuing on Thursday, we’ll get earnings from Accenture (ACN) – Get Accenture Plc Class A Report, Adobe Systems (ADBE) – Get Adobe Inc. Report and FedEx (FDX) – Get FedEx Corporation Report. Cramer told viewers to wait for a dip in Accenture before buying, but said Adobe can be bought no matter what. As for FedEx, he said this stock is getting too hard to predict.
Finally, on Friday, we’ll close out the week with Darden Restaurants (DRI) – Get Darden Restaurants, Inc. Report and Cramer expects this company to report solid earnings.
Chris Versace and Bob Lang, co-portfolio managers of Action Alerts PLUS, have been looking at the chart of Amazon.com. They say the weekly numbers show a solid uptrend. Find out more about their take on Amazon and other top companies with a membership in the Action Alerts Plus Club.
Executive Decision: Azek
In his “Executive Decision” segment, Cramer spoke with Jesse Singh, CEO of Azek Company (AZEK) , the composite decking maker with shares that are up 19% for the year.
Singh said Azek has been adding production capacity for the past 18 months and continues working hard to meet growing demand. He also noted that Azek has priced their products against inflation, and between pricing and productivity improvements, they feel confident they will see margin expansion next year.
When asked about their share price, which is often mistakenly tied to lumber prices, Singh reminded viewers that 90% of their business has been residential, and that business has been growing at 18% annually, despite the volatility in lumber.
Turning to the topic of competition, Singh explained that Azek positions itself as a premium product, but he admitted that rival Trex (TREX) – Get Trex Company, Inc. Report has been a public company longer and is more well known. “Our stock price will catch up,” he predicted.
Finally, when asked about their recycling efforts, Singh said Azek remains committed to their goal of recycling one billion pounds of plastics, including PVC, annually. They are currently approaching the halfway point of that goal.
Homework
In his “Homework” segment, Cramer followed up on a few stocks that were asked about by his investment club members. The first question asked how to handle a high-flying stock that never seems to come down. Cramer said to wait for extraneous events that have nothing to do with the company, like market sell offs, and use that weakness to buy.
The next question asked when to cut your losses and sell a stock. Cramer said when you think you have a loser, you have to go to battle and sell into any strength so you can buy them back lower.
When asked how to properly diversify his portfolio, Cramer suggested sticking with one winner in a handful of different sectors that don’t trade together. And when forced to choose between Nvidia (NVDA) – Get NVIDIA Corporation Report and Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report, Cramer said he’d be buying AMD at current levels.
Finally, Cramer suggested buying Nucor (NUE) – Get Nucor Corporation Report on the heels of the recently passed infrastructure bill.
Federal Reserve
With the hottest inflation numbers in the past 39 years, it’s all but certain that the Federal Reserve will begin raising interest rates sooner as opposed to later. But while the pundits like to claim that the market’s rally is based solely on the Fed’s “easy money” policies, Cramer took a page from history as his guide.
The last time the Fed started raising interest rates was in 2015, when it raised rates once in December. It was a full year later, in 2016, when we saw a second. That was followed by three hikes in 2017 and four in 2018 before Jay Powell’s infamous “overshoot” comment brought the party to an end.
During that time, the pundits were also out in force, proclaiming that the Fed was about to wreck our entire economy. During those four years, however, the Dow Jones Industrial Average rose by 50.2% at its peak, proving all of the naysayers wrong yet again.
Cramer noted that the best performing sectors early in this cycle included the consumer staples, technology and financial technology. But by the end of 2016, that rally grew to include the industrials, materials and the cyclicals. Even when the Fed got aggressive in 2017, the rally continued.
The Fed does indeed have the power to wreck the economy, Cramer concluded, but don’t believe all of the negative chatter you hear. Stocks can do very well when the Fed taps the brakes on the economy.
Lightning Round
In the Lightning Round, Cramer was bullish on Enphase Energy (ENPH) – Get Enphase Energy, Inc. Report, Ford Motor (F) – Get Ford Motor Company Report, Atlas Air Worldwide Holdings (AAWW) – Get Atlas Air Worldwide Holdings, Inc. Report, Flex (FLEX) – Get Flex Ltd. Report and Jabil (JBL) – Get Jabil Inc. Report.
Cramer was bearish on Sunrun (RUN) – Get Sunrun Inc. Report and Lightning eMotors (ZEV) – Get Lightning eMotors, Inc Report.
No Huddle Offense
In his “No Huddle Offense” segment, Cramer told viewers to take some time to appreciate this moment in history, where things are so positive for so many American business.
On the company’s conference call, Costco’s (COST) – Get Costco Wholesale Corporation Report management spoke of port delays, supply chain disruptions, rising labor costs, and truck driver shortages. Yet despite all of those, the company is simply crushing it, with shares up 6% today alone.
Then there’s Oracle (ORCL) – Get Oracle Corporation Report, the enterprise software maker that just posted its best quarter in years, with accelerating revenue growth, a share buyback and a great dividend. Shares of Oracle soared 15% today.
Semiconductor maker Broadcom (AVGO) – Get Broadcom Inc. Report also posted an amazing quarter, in a time of worldwide semiconductor shortages. All of these companies are proof that if you’re a well-run company, you can overcome any challenge.
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