As the COVID Delta variant keeps America on the run, Jim Cramer told his Mad Money viewers on Tuesday that it’s time to dust off the spring 2020 playbook and start investing in the pseudo-lockdown stocks. What is a pseudo-lockdown stock? It’s the type of business that thrives in an economy that gets “worse before it gets better.”
In retail, that means investing in WATCH, Cramer’s acronym for Walmart (WMT) – Get Report, Amazon (AMZN) – Get Report, Target (TGT) – Get Report, Costco (COST) – Get Report and Home Depot (HD) – Get Report. All of these retailers have weathered the pandemic with flying colors and are the ones consumers trust the most.
Cramer says these companies never get stuck in a rut. They grow, innovate and buy where necessary. That is also smart for investors, he says. Learn more about Real Money on Cramer’s investment ideas for PepsiCo, Kraft Heinz, McCormick, and others.
When it comes to clothing and apparel, Lululemon Athletica (LULU) – Get Report, Ralph Lauren (RL) – Get Report and Nike (BY) – Get Report were among Cramer’s favorites. Shares of Ralph Lauren rose 6.1% at the end of Tuesday.
Other highlights were Domino’s Pizza (DPZ) – Get Report, which just reported a new eruption quarter, along with Apple (AAPL) – Get Report, an Action Alerts PLUS holding company and the newly minted Robinhood (CAP) – Get Report, which saw a rebound after its weaker-than-expected IPO.
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Executive Decree: Clorox
In the “Executive Decision” segment, Cramer welcomed Linda Rendle, CEO of Clorox Co. (CLX) – Get Report, the consumer products maker, which plunged 9.4% after the company reported massive loss of sales and profits amid rising costs and hesitant demand as our economy struggles to contain the Delta variant.
Rendle said after record quarters last year, Clorox expected sales to moderate. However, looking at the year, all four segments of the company posted double-digit revenue growth and, even with recent declines, are still significantly above pre-pandemic levels.
Clorox is coming out of the pandemic stronger than when it came in, Rendle added. The company has invested heavily in digital channels and has learned a lot about the new behavior and desires of consumers. Clorox also remains committed to its dividend and to shareholders, Rendle added, even in these volatile times.
Cramer said the next quarter will be a pivotal quarter for Clorox, one where we’ll learn what post-pandemic sales will really look like.
The IPO problem
There are many things to worry about in the market, but what worries Cramer most is not the Delta variant, or China, or the looming debt crisis. What worries him most are IPOs.
When new shares come on the stock market, that puts everything under pressure. So far this year, we’ve seen 304 IPOs totaling $105 billion. That puts 2021 in line for a record year…with five months to go. And these IPO numbers don’t account for more than 300 deals that went public through SPAC.
IPO fatigue is fast approaching, Cramer warned, and some deals have already been canceled or delayed. The highlight was Didi Global (DIDI) – Get Report, which was banned from Chinese app stores a day after the company went public here in the US
IPOs have always tilted in favor of investors, Cramer explained, and are designed to always see a first-day rise. But lately, your first day of trading is a coin toss, Cramer said, and the days to follow are a gamble. Even the much-hyped Robinhood (CAP) – Get Report failed to break the downward spiral of IPO.
Fortunately, deal flow finally seems to be slowing down, Cramer concluded, and not a moment too soon.
In his “Off The Charts” segment, Cramer checked in with colleague Tom DeMark for another look at where the markets are likely to go. According to DeMark, things are not looking good.
DeMark first looked at a daily chart of the S&P 500 and noted that this rally is quickly running out after hitting 12 new highs. According to DeMark’s 13-day sales countdown, the rally will be over when the S&P closes above 4,430 on Wednesday.
The same pattern can be seen in the Nasdaq 100 index, which is also on day 12 of the 13-day cycle. If both indices peak again tomorrow, completing the cycle, things could get very ugly.
Even the Dow Jones Industrial Average isn’t immune, with DeMark picking up an ever-widening fan pattern of higher highs and lower lows that is uncannily similar to that seen before the 1929 crash.
For those who think cryptocurrency may be immune, think again. DeMark also disliked Bitcoin’s chart, noting that the recent bottom has not been accompanied by significant bad news to confirm the move.
Big companies are shaking things up
In his No-Huddle Offense segment, Cramer said that while good companies tend to be risk averse and rarely change, large companies aren’t afraid to shake things up. Example: Today’s news that PepsiCo (FUT) – Get Report spins off Tropicana and Naked Beverages for $3.3 billion.
While still an iconic brand, Tropicana is beginning to fall out of favor with younger consumers who prefer lower-sugar drinks. Cramer said splitting off these brands is what PepsiCo is doing, cutting off slowing brands to double down on the fastest growing brands. That’s how you grow profit.
Other major companies, according to Cramer, include McCormick (MKC) – Get Report, Hormel (HRL) – Get Report and constellation marks (STZ) – Get Report, all of whom are constantly rearranging their product portfolios and often making difficult decisions to rekindle growth.
Here’s what Jim Cramer had to say about some of the stocks that callers were offering during the Mad Money Lightning Round Tuesday night:
MKS instruments (MKSI) – Get Report: “I don’t understand why this stock is so cheap.”
Aurinia Pharmaceuticals (AUPH) – Get Report: “They should do better. I want to be careful with that stock.”
Sorrento Therapeutics (DEER) – Get Report: “I think this stock is overvalued and I don’t like the way they have treated themselves.”
Palantir Technologies (PLTR) – Get Report: “This is a cult stock. Nobody knows what they’re doing, but people still like it.”
SoFi technologies (SOPHIA) – Get Report: “I think they are doing a great job and you should buy the stock.”
Spirit AeroSystems (SPR) – Get Report: “I prefer Boeing. That’s the one to buy, not the suppliers.”
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At the time of publication, Cramer’s Action Alerts PLUS had a position in AAPL, AMZN, COST.