The market rarely moves in a straight line. So when you see a counter-trend rally like we saw Monday, that’s your chance to pounce, Jim Cramer told his Mad Money viewers.
We all know that when inflation rears its ugly head, that’s the time to sell growth stocks like technology and snap up cyclical names like the industrials and financials. Monday, the tech sector rose for the second consecutive trading session, offering the opportunity to lighten on tech and start buying the industrials.
Cramer said this strategy is especially important in this market, because there’s a real shortage of quality industrial stocks to buy. Investors only have Deere (DE) – Get Report and AGCO (AGCO) – Get Report to choose from when it comes to farm equipment. Caterpillar (CAT) – Get Report and Cummins (CMI) – Get Report are the only engine makers.
On Monday, Kansas City Southern (KSU) – Get Report was acquired, leaving investors with one less railroad. Between buybacks and acquisitions, there are far fewer shares of industrials available to trade, which makes the day’s weakness a real gift.
The opposite is true in technology, where a deluge of IPOs, SPACs, secondary offerings and lockup expirations keep the markets awash in shares that it really doesn’t need. Cramer said until this spigot is turned off, tech will struggle to see a meaningful rally. That’s why he’s recommending stocks like Nucor (NUE) – Get Report, Boeing (BA) – Get Report, Ford (F) – Get Report and Southwest Airlines (LUV) – Get Report — and not tech.
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Executive Decision: Biohaven Pharma
In his first “Executive Decision” segment, Cramer spoke with Dr. Vlad Coric, CEO of Biohaven Pharmaceuticals (BHVN) – Get Report the migraine drug maker with shares that are down from a secondary offering just last week. Biohaven shares closed up 2.4% Monday.
Coric said it’s been one year since Biohaven launched Nurtec ODT for the treatment of migraine. Since then, his company has filled over half a million prescriptions and is changing the lives of patients around the world.
Coric credited Biohaven’s digital-first marketing efforts for much of their success. He said using the patient’s voice has been instrumental in getting the word out and the company is seeing over 1,000 patients a week reaching out over social media to thank them for their game-changing drug.
Nurtec is only just getting started. The company expects to receive approval from the FDA in the second quarter to use Nurtec for the prevention of migraine as well as acute treatment. Preventative use will be a game-changer for many patients.
When asked about insurance availability, Coric noted that 90% of carriers will pay for Nurtec and the company has affordability options available for those who don’t.
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The IPOs and SPACs keep on coming, but there is one recent issue that caught Cramer’s attention, online gaming platform Roblox (RBLX) – Get Report, which came public via a direct listing, to much fanfare and excitement.
Cramer said Roblox is a turbocharged growth stock that surged during the pandemic. The company allows players, most of which are age 13 or younger, to create their own 3D worlds and share them with friends. The platform boasts 32 million daily active users which have provided Roblox with 82% revenue growth.
As with any new issue, Cramer said a great story is only as great as its valuation. In the case of Roblox, shares currently trade at 17 times booking, which is expensive, but not out of line with other high-flying tech names. The Roblox story could get a little choppy depending on how soon, and how quickly, the economy reopens, but even so, he recommended starting a position. Cramer advised not paying more than 20 times bookings.
Executive Decision: Arrival
For his second “Executive Decision” segment, Cramer also spoke with Avinash Rugoobur, president of Arrival, the electric vehicle maker that will be merging with a SPAC, CIIG Merger (CIIC) , on Wednesday. Shares of arrival will trade under the ticker ARVL.
Rugoobur explained that Arrival is making systems that will make electric vehicles possible via low-footprint micro-factories. The company’s first platform will enable buses, large vans and smaller delivery vehicles to be made in an efficient and less capital intensive way starting at the end of this year.
Arrival has a long-term partner in UPS (UPS) – Get Report, which has both invested in the company and placed a large order for some of its first delivery vehicles. Arrival’s first micro factory will be located in Charlotte, N.C.
Stock Bulls vs. Bond Bears
In his No-Huddle Offense segment, Cramer sounded off on the battle raging between the stock bulls and the bond bears. In one camp are the bulls, which believe stimulus checks will lead to more stock investing, while in the other camp are the bears, betting that rising inflation will send bonds rallying instead.
Who’s right? Cramer used Tesla (TSLA) – Get Report as an example. Shares of the automaker have plunged from the $900s to the $600s in recent weeks as institutions swap out of tech and into cyclicals. But over the weekend, Kathy Wood, of Ark Invest, boldly predicted that Tesla shares would see $3,000 by 2025.
Cramer said in the short term, young investors with stimulus checks will likely prevail and send Tesla higher. But Tesla is far bigger than GameStop (GME) – Get Report, which means in the end, the institutional selling will keep this stock stuck in neutral for the foreseeable future no matter how promising the company’s outlook.
Stocks finished higher Monday and the Nasdaq posted solid gains as Treasury yields pulled back.
The Dow Jones Industrial Average finished up 103 points, or 0.32%, to 32,731, the S&P 500 rose 0.7% and the tech-heavy Nasdaq gained 1.23%.
Here’s what Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Monday evening:
Marvell Technology (MRVL) – Get Report: “This is still the ultimate 5G wireless play and I’m a buyer.”
CRISPR Therapeutics (CRSP) – Get Report: “A company like this isn’t bought on earnings, it’s bought on speculation. As long as you’re OK with that, I’ll bless it.”
Lithia Motors (LAD) – Get Report: “I think this is a very, very good stock. “
Nokia (NOK) – Get Report : “They do everything they can to save that one, but no.”
Canadian Solar (CSIQ) – Get Report: “I’ve cooled on the solar space.”
Metromile MILE: “I liked Lemonade (LMND) – Get Report when it was much lower. I’d go with that one.”
Bionano Genomics (BNGO) – Get Report: “Buy this one for speculation and only for speculation.”
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At the time of publication, Cramer’s Action Alerts PLUS had no position in the stocks mentioned.