When all else fails, well, that’s pretty much the bottom, Jim Cramer told his Mad Money viewers after another gloomy Monday on Wall Street. This was the day we saw the last beloved sector of the market — oil and gas — start to sell off. With nothing left to sell, the bottom can’t possibly be far away.
It’s hard to recommend stocks when everything is falling. Even a stock like Nvidia (NVDA) – Get NVIDIA Corporation Report, which now trades at just 30 times earnings, is cheap when compared to its peers. But with its peers also selling off, even that great valuation is being called into question.
There are still a number of different groups that are selling stocks. The first group is looking for income, taking refuge in the safety and 3.3% yield of the 3-year Treasury bond. Those investors aren’t likely to come back.
The second group of sellers are the money managers and hedge funds that are being forced to sell in order to meet margin requirements. A similar group of money managers is being forced to sell just to stay alive. With stocks like GoodRX (GDRX) – Get GoodRx Holdings, Inc. Class A Report plunging 33% and Rivian (RIVN) – Get Rivian Automotive, Inc. Class A Report falling 20%, there are few places left to hide.
The fourth group of sellers are the individuals who bought meme stocks and other speculative things, like crypto, and now have been totally blown out of the water.
But all of this selling will eventually be a blessing, Cramer concluded. Eventually, the selling will end, and those of us who survived will live to play another day.
Executive Decision: American Electric Power
In his first “Executive Decision” segment, Cramer spoke with Nick Akins, chairman, president and CEO of American Electric Power (AEP) – Get American Electric Power Company, Inc. Report, the Ohio-based utility with shares up 12% for the year thanks to a 3.1% dividend yield.
Akins said America continues to transition to a clean energy economy, and AEP’s wind projects alone have already saved their rate payers $3 billion. In total, AEP plans to have 16 gigawatts of renewable capacity online by 2030.
Russia’s invasion of Ukraine has shocked the world’s energy market, Akins added, and has demonstrated the importance of a balanced power portfolio. Countries like Germany, which now rely almost completely on Russian natural gas, are paying the price for not investing into other options. The world must respond to this crisis, he said.
When asked about the U.S. economy, Akins remained bullish, saying that he’s seeing strength in manufacturing as well as in data centers and with special projects like semiconductor manufacturing, which is making a resurgence in states like Ohio.
Executive Decision: Papa John’s
For his second “Executive Decision” segment, Cramer also spoke with Rob Lynch, president and CEO of Papa John’s (PZZA) – Get Papa John’s International, Inc. Report, the pizza giant that’s up against tough comparisons from last year at the height of the pandemic.
Lynch said Papa John’s has delivered 10 consecutive quarters of outperformance and he’s pleased with their quarterly results. He said while food prices continue to rise, they’ve been able to offset those increases with productivity and efficiency.
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Staffing is also starting to improve as people are slowly returning to the workforce.
In China, Lynch said, Papa John’s currently has 250 locations, with many areas still underdeveloped.
Papa John’s continues to take market share thanks to food innovations, Lynch added. New items, like their pepperoni stuffed crusts, are proving to be a big hit with customers.
Executive Decision: XPO Logistics
For his final “Executive Decision” segment, Cramer checked in Brad Jacobs, chairman and CEO of XPO Logistics (XPO) – Get XPO Logistics, Inc. Report, which is spinning off divisions and breaking itself into two in order to unlock value. Shares of XPO trade at just nine times earnings, and dipped another 5.1% Monday.
Jacobs said XPO delivered another great quarter, with its highest revenues and earnings per share ever, yet investors still struggle to give shares the credit they deserve. By splitting into two, he said, there will be two, single-focus companies that should be a lot easier for Wall Street to value and appreciate.
“Our shares won’t be trading at nine times earnings for long,” Jacobs assured shareholders.
When asked about continuing supply chain disruptions, Jacobs explained that the labor shortage is starting to improve and goods are beginning to move again. However, with China locked down and Russia disrupting Europe, it may take awhile for some goods, like food and semiconductors, to work themselves out.
Cramer was bearish on Ligand Pharmaceuticals (LGND) – Get Ligand Pharmaceuticals Incorporated Report, Golar LNG (GLNG) – Get Golar LNG Limited Report, Banco Santander (SAN) – Get Banco Santander SA Report, New York Community Bancorp (NYCB) – Get New York Community Bancorp, Inc. Report and Silicon Motion (SIMO) – Get Silicon Motion Technology Corp. Report.
Stop Blaming the Fed
In his “No Huddle Offense” segment, Cramer said it’s time to stop blaming the Federal Reserve for acting too late on inflation.
The Fed couldn’t have seen the Omicron wave coming, nor the lockdowns in China or Russia’s invasion of Ukraine. Without the stimulus the Fed provided, our economy would have almost certainly spiraled into recession.
But that doesn’t mean the Fed can’t do more now, when our economy is strong enough to handle rising interest rates. In Cramer’s opinion, Fed chair Jay Powell’s statement that a 75 basis point hike wasn’t being considered was a mistake. It would be better to raise rates by a full 1%, and get it over with all at once, he said, rather than drag it out for the next few months.
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