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You will need much more than a meteorologist to choose the winning actions, said Jim Cramer at his Crazy money viewers on Tuesday, but it's still useful to know in which direction the wind is blowing. In this market, equities suffer both adverse turbulence and headwinds, often at the same time.
For example, PepsiCo's current earnings (PEP), which were widely anticipated by a 5-cent reduction in the company's forecast. But Cramer noted that the weakness came from a strong dollar, and not a weak demand for Pepsi products. This means that weakness is only temporary and non-systemic. Add to that the rise in aluminum prices, which can be offset by the shift to plastic, as well as rising labor costs, which can eventually be offset by autonomous vehicles, and Cramer concluded that PepsiCo was still a purchase.
Then there is the announcement today that Amazon (AMZN) has raised its minimum wage to $ 15 at the hour. Cramer said it could be great for the workers, but wage inflation is the only thing that will prompt the Federal Reserve to raise its interest rates more aggressively, which is bad for the markets. .
Given all these conflicting messages, how can the market still reach new records?
Cramer said that there were two stealthy clear winds in play that nobody talks about. First, full employment generates more savings, which translates into a steady increase in cash flows in equities. Secondly, there is a shortage of stocks to buy for this money, thanks to merger programs, acquisition and redemption of shares. After all, the market is dependent on supply and demand, and rising demand with declining supply means prices will go up.
Cramer and the AAP team are taking a closer look at Honeywell's derivative product (HON), Garrett Motion Inc. Find out what they say to their investment club members and join the conversation with a free trial subscription to Action Alerts PLUS.
Outside the graphics: semiconductors
In his "Off The Charts" segment, Cramer asked colleague Carolyn Boroden about the graphics of some of the hottest semiconductor stocks.
Boroden first looked at a daily Nvidia (NVDA) chart, noting that the stock had already hit $ 30 in the last eight days. She felt that investors might be late to the party if they buy now.
Boroden was of the same opinion as Broadcom (AVGO), another great traveler, up $ 50 from its lows. The latest upward movement of the stock was $ 54 and, with a $ 3 resistance cap against current levels, equities might have a hard time getting back together before picking up higher.
This was not the case for one of the group's laggards, Intel (INTC), which is supported in the $ 42 to $ 44 share tranche. If Intel manages to deliver its new chips in time, the charts indicate that the stock could work well.
Finally, Boroden examined another integrated circuit manufacturer, Texas Instruments (TXN), noting that this stock had experienced several declines in the range of $ 16, just as the current, indicating a likely reversal. .
Decision of the executive: Paychex
For its "Executive Decision" segment, Cramer has been meeting with Marty Mucci, President and CEO of Paychex (PAYX), ahead of Friday's crucial number of jobs. Paychex shares rose 1.4% Tuesday on the basis of solid results released by the company.
Mucci said Paychex had a strong quarter with profits up 16%. This growth was driven by his company's strong product portfolio, which provides human resources services to small and medium-sized businesses. Now more than ever, Paychex uses data analytics to help generate referrals and target new customers, especially the smaller ones, better than ever before.
"In a labor market as competitive as this one," added Mucci, it's more important than ever that companies offer great benefits to their employees, and that's where Paychex can bring its business. help.
Finally, when asked about Square's (SQ's) competition, Mucci said that Square's new payroll system was not competitive because it was not available in all 50 states, was to be filed four times. days in advance and did not support the employees either. as an employer.
What's going on with GE?
Why did General Electric (GE) really fire its CEO, John Flannery, after just 18 months of work? Cramer explained that it was not about the speed of recovery, but the problems that Flannery should have seen coming.
According to Cramer, American companies have a real aversion to looking at past mistakes and learning from them. Flannery, as a GE insider, would have been frowned upon when he had dissected the many mistakes made by his predecessor, Jeff Immelt. So he progressed and boldly told the board that there were no more surprises coming. But there was.
In retrospect, GE has not invested in its two burgeoning industries: healthcare and aerospace, while doubling its operations in the energy, oil and gas sectors. At the same time, GE's long-term care policies cost the company 20 times more than premiums paid by customers.
So, while GE's board of directors was completely unaware, it was Flannery who got the better of those predictable charges that the company must now assume. An outsider such as Larry Culp – the first underdog in the company's history – has no legacy to retain, Cramer concluded, and can eliminate all the writedowns he needs to put back things in order.
On the subject of real money, Cramer explains the real reasons for the problems of General Electric (GE). Get more of his ideas with a free trial subscription to real money.
Prohibited offense
In his "No-Huddle Offense" segment, Cramer reminded viewers that it's important to always make your own decisions and not rely on just one analyst or piece of research. Even if he is mistaken sometimes, as evidenced by the current 35% drop in Stitch Fix (SFIX).
That's why Cramer wanted to explain what the bearish call of analyst Jay Sole in June had overlooked about discount retailers like TJX Companies (TJX), Ross Stores (ROST) and Burlington. Blinds (BURL), among others.
Sole's thesis was that more people would buy online, retailers without a strong online presence would collapse.
Cramer said that while this may have been true in the long run, since the recession, these discount retailers were thriving as consumers became increasingly frugal and big chains continued to downsize, offering discounted retailers a ton of good goods for sale. You simply can not forget the experience of treasure hunting at these retailers. This was clearly evident this quarter when all three posted remarkable gains.
Lightning Tower
In the Lightning Round, Cramer was optimistic for Proofpoint (PFPT), PayPal (PYPL), Square (SQ), Salesforce.com (CRM) and Cypress Semiconductor (CY).
Cramer was bearish on Lam Research (LRCX), Patterson Companies (PDCO), Noble Midstream Partners (NBLX) and Nutanix (NTNX).
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