Inflation may be raging, but that doesn’t mean bad news for all titles, Jim Cramer reminded his Mad Money viewers on Tuesday. In fact, there are some stocks that win big when inflation is on the rise, while others are simply immune to inflation.
Energy is a natural winner of inflation, as energy producers are paid more for each unit they produce. This means investors can’t go wrong with stocks like Chevron. (CVX) – Get the Chevron Corporation Report, Pioneer of natural resources (PXD) – Get the report from Pioneer Natural Resources Company and Devon Energy (DVN) – Get the Devon Energy Corporation report. They can also condor the oil services with Schlumberger (SLB) – Get the Schlumberger NV report, natural gas with Tellurian (TELL) – Get the Tellurian Inc. report and pipelines with enterprise product partners (DEP) – Get Enterprise Product Partners LP Report.
Then there are the financials, which also benefit when inflation drives up interest rates. Investors can consider banks like Bank of America (BAC) – Get the Bank of America Corp report or Wells Fargo (WFC) – Get the Wells Fargo & Company Report, or names of indicators such as Goldman Sachs (SG) – Get the report from Goldman Sachs Group, Inc. (GS) and Morgan Stanley (MRS) – Get the Morgan Stanley (MS) report.
Then there are tech and cloud stocks, which help companies save on labor and costs by making them more productive. Here, investors can look to names like Workday (DAY) – Get the Workday, Inc. (WDAY) report, ServiceNow (NOW) – Get the report from ServiceNow, Inc. and snowflake (SNOW) – Get the report from SNOWFLAKE, INC., with Amazon Web Services (AMZN) – Get the Amazon.com, Inc. report and Microsoft (MSFT) – Get the report from Microsoft Corporation (MSFT). Cyber security is also a necessity, which means Palo Alto Networks (PANW) – Get the report from Palo Alto Networks, Inc., and all of these names require semiconductors from Advanced Micro Devices (AMD) – Get the Advanced Micro Devices, Inc. report and Nvidia (NVDA) – Get the NVIDIA Corporation report.
Finally, there is health care, which is completely immune to inflation. Cramer recommended Eli Lilly (THERE IS) – Get the Eli Lilly and Company (LLY) report and Johnson & Johnson (JNJ) – Get the Johnson & Johnson Report (JNJ) like his favorites.
Emerson Electric and Aspen Technology
Earlier this month, Emerson Electric (DME) – Get the Emerson Electric Co. announced the merger of its software division with Aspen Technology (AZPN) – Get the report from Aspen Technology, Inc. in an $ 11 billion deal. Cramer interviewed Emerson CEO Lal Karsanbhai about the deal on October 11. But since then, Emerson’s shares have sold off, forcing Cramer to revisit what he saw as a savvy, forward-thinking transaction.
Under the terms of the agreement, Emerson will separate its two software divisions and merge them with Aspen. The company is also injecting $ 6 billion in cash, in exchange for a controlling 55% stake in the combined company. The transaction represents a premium of 27% for current Aspen shareholders.
But while some have criticized the deal as mere financial engineering, Cramer thinks otherwise. He explained that Emerson maximizes the value of their software operations by combining with Aspen, and they still control them. Better yet, there are millions of cost synergies to be saved and potentially billions of cross-selling opportunities to be seized.
In an environment where everyone places great importance on the environment, as well as subscription revenue, Cramer noted that the Aspen deal gives Emerson both.
Know your IPO
In its “Know Your IPO” segment, Cramer dove into the recent IPO of On Holding ONON, the Swiss footwear and sportswear company that debuted on September 15. The shares were priced at $ 24, opened at $ 35 and climbed to over $ 40 before making their way back to Earth, where they are now trading just over $ 29. Is the drop a buying opportunity? Or has something gone horribly wrong?
On the surface, On Holding has a fabulous business. What started out as a specialty running shoe has grown into a full-fledged clothing brand with over 8,100 locations. The company derives 64% of its business from wholesale and also has a lucrative direct-to-consumer operation. In the first six months of 2021, sales increased by 85% and On Holding even managed to make a small profit.
So why don’t stocks fly to the moon? Two words. Supply Chain. On Holding manufactures 100% of its shoes in Vietnam, a country hard hit by the Delta variant which has closed many factories. On Holdings’ problems could get pretty ugly, and we still don’t know how bad things can get for the company before the holiday season. Some analysts are forecasting negative growth due to their single-source manufacturing process.
While On Holding has a great history of long-term growth, it’s just too risky to own it in the short-term, Cramer said, especially with stocks still trading for 10x sales and over 40x earnings. projected.
Executive Decision: Splunk
In his “Executive Decision” segment, Cramer spoke with Doug Merritt, President and CEO of Splunk (SPLK) – Get the report from Splunk Inc., the data and analytics company that is currently hosting its 12th annual user conference this week. Splunk shares have risen 6% over the past week.
Merritt had a lot of positive things to say about his business, including the tenth straight quarter of double-digit growth in its cloud business. He said cybersecurity makes up 50% of Splunk’s business, but the power of its platform lies in its ability to reuse data in different applications.
One of the company’s latest features is helping businesses automatically remove sensitive and personally identifiable information from their data as it is uploaded to the Splunk platform. In this way, businesses and consumers can rest assured that their information will not be leaked or hacked.
Merritt also noted that government continues to be a key industry for Splunk as it is imperative that government agencies modernize and protect their data.
Finally, Merritt commented on one of his biggest customers, Walmart. (WMT) – Get the report from Walmart Inc., which uses Splunk to deliver a great digital experience to over 220 million customers.
GameStop and Gamification
In his “No Huddle Offense” segment, Cramer commented on the release of the Securities and Exchange Commission report on what exactly happened when the actions of GameStop (GME) – Get the Class A report from GameStop Corp. parabolic wemt earlier this year.
Mad Money’s first rule has always been “do no harm,” which means Cramer never encourages risky behavior. In this regard, he felt that the SEC report did not warn investors about the risks associated with taking investment advice from Reddit and blindly following memes.
Commission-free trading has worked wonders in attracting new investors to the stock market, but companies like Robinhood (HOOD) – Get the Robinhood Report and indeed, the industry as a whole needs to do more to educate young investors on how to invest responsibly.
Cramer has always advocated putting your first $ 10,000 in a low-cost index fund, reserving your “Mad Money” portfolio for funds you can afford to lose. Yes, stocks can go to zero, Cramer reminded viewers.
The problem with gamification of investing is that there are no safeguards. Even real gambling doesn’t allow you to bet with borrowed money, but for some reason brokerages will allow you to invest with borrowed money. That, Cramer concluded, must change.
Here’s what Cramer had to say about some of the actions that callers offered during the “Mad Money Lightning Round” on Tuesday night:
CVS Health (CVS) – Get the CVS Health Corporation report: “This one is good and they are doing a good job.”
23 and me (ME) – Get the 23andMe report: “I like 23andMe. I think the stock should be bought.”
Petrobras (PBR) – Get the ADR report sponsored by Petroleo Brasileiro SA: “I think the oil is so strong that a rising tide can lift even this boat.”
Weyerhaeuser (Wyoming) – Get the Weyerhaeuser Company Report: “It’s too cheap. I think they’re worth owning.”
To sign up for TheStreet’s free Daily Booyah! newsletter with all the latest articles and videos please click here.