The latest COVID infection rates are scary, Jim Cramer admitted to his Mad Money viewers Wednesday, but if you take your cues from the retail sector, our economy might not be in as much trouble as we think.
Cramer admitted that it might seem impossible to get a clear picture of what the economy is doing right now. The auto sector continues to be a mess, with shortages sending General Motors (GM) – Get Report down 8.9% Wednesday. Meanwhile, housing continues to be red-hot as interest rates remain at historic lows.
Other sectors, like travel, are a mixed bag, with bookings on the rise, but only with increased promotions crimping gross margins.
So where can investors turn for a true read on the economy? Cramer said to look no further than retail. The retail REITs all posted strong earnings this quarter and offered positive guidance and commentary to boot.
Over on Real Money, Cramer says all of the major real estate trusts involving shopping have reported and, he says, “the companies with a ton on the line, the ones that have to make longer-term commitments, are simply going pedal to the metal in sign-ups. It’s one of the best environments in history.” Read more of what he has to say about these stocks and retailers including Walmart (WMT) – Get Report, Amazon (AMZN) – Get Report, Target (TGT) – Get Report, Costo (COST) – Get Report and others.
Whether it was strip malls, shopping centers or outlet destinations, companies like Simon Property Group (SPG) – Get Report and Kimco Realty (KIM) – Get Report have been making big, long-term bets on the future, Cramer said, which is an encouraging sign that they don’t believe the Delta variant will derail our recovery.
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Seeing What Others Don’t
One of the biggest, and most transparent, hedge fund winners last year was Ark Invest’s Cathie Wood. And while many of Wood’s favorite stocks fell out of favor on Wall Street this spring, Cramer told viewers that she remains a great source for investing ideas. One of Wood’s recent buys is UiPath (PATH) – Get Report, which makes business process automation software.
UiPath came public in April and has seen its shares drift lower since their debut. Shares are now off 17% since the IPO, but despite the decline, Ark Invest continues to buy and is now one of the company’s biggest shareholders.
So what does Wood see that the rest of Wall Street doesn’t? Cramer said there’s a lot to like about UiPath. The company previously had 75% of their customers in the finance and accounting space, but has since diversified into many other industries, like healthcare, retail and the public sector. This gives the company a bigger market and faster growth.
Business automation is a crowded space, Cramer admitted, with Microsoft (MSFT) – Get Report, Salesforce.com (CRM) – Get Report and ServiceNow (NOW) – Get Report all offering automation products. However, despite UiPath’s high valuation of 28 times sales, Cramer thought Wood might be onto something. He suggested starting a small position now, then adding on as the lockup period for the IPO expires in the coming weeks.
Wall Street’s True Bargains
Many investors still regard DuPont as a commodity chemical maker, but nothing could be further from the truth. Under the leadership of CEO Ed Breen, DuPont has transformed itself into a specialty chemical giant that creates a ton of value for its customers.
DuPont has been dumping non-core assets to clean up its balance sheet and double down on high-growth opportunities. In 2019, DuPont sold its nutrition and biosciences division for $7.3 billion and in March, acquired Laird Performance Materials, giving the company a solid foothold in electric vehicles and high-performance computing products.
When DuPont last reported, the company delivered a 12-cents-a-share earnings beat with 26% sales growth. Trading at just 17 times earnings, Cramer said DuPont is a must-own, which is why he’s made it a part of his Action Alerts PLUS investment club.
Executive Decision: Devon Energy
Muncrief said there’s been a huge paradigm shift in the oil industry. He said gone are the days where oil producers spend more than their cash flows allow. In today’s market, shareholders demand that companies don’t overspend and use their cash wisely. That’s why Devon has adopted a fixed-plus-variable dividend strategy that has allowed them to accomplish all of their goals while also paying down $1.2 billion in debt so far this year.
Muncrief added that Devon’s merger with WPX Energy gave the company access to over 400,000 acres in the best part of the Delaware Basin. Now, all of their assets have growth or free cash flow components.
When asked about U.S. oil production, Muncrief said we’re in a good position for the future. Ten years ago, no one thought North Dakota could eclipse Alaska in oil production, but now it looks like New Mexico could move into the No. 2 spot as new discoveries continue to change the production landscape.
Don’t Be Greedy
In his “No Huddle Offense” segment, Cramer reminded viewers that bulls make money, bears make money, but pigs get slaughtered. If you’re a shareholder of Robinhood and are up 50% today, Cramer said you must take profits.
Cramer made clear that he’s still a big fan of Robinhood and the Robinhood movement of democratizing finance. But discipline must always trump conviction, Cramer said, and when you’re up big, you have to at least take out your original investment.
“Don’t be greedy,” Cramer concluded.
Here’s what Jim Cramer had to say about some of the stocks that callers offered up during the “Mad Money Lightning Round” Wednesday evening:
ViacomCBS VIAC: “Viacom is an inexpensive stock in an industry that continues to consolidate.”
Desktop Metal DM: “I’m not going there. I don’t like 3D printing.”
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At the time of publication, Cramer’s Action Alerts PLUS had a position in MSFT, CRM, AMZN, COST.