The stock market is caught in a race between inflation and deflation, Jim Cramer told his Mad Money viewers Tuesday. And while inflation got head start, the forces of deflation are starting to take hold, but they come with a hefty price.
If you listened to the Colgate-Palmolive (CL) conference call, then you already know the company sees input costs moderating in the back half of the year. Toolmaker Stanley Black & Decker (SWK) told investors that it expects semiconductors to be more readily available in the second half. These two companies may be outliers at the moment, but they prove that the war on inflation can be won, at least by some.
Over on Action Alerts PLUS, co-portfolio managers Bob Lang and Chris Versace are taking a close look at UPS (UPS), after the company delivered an upbeat outlook for 2022 and increased its dividend. Get in on the conversation and hear what they're telling their investment club members at Action Alerts PLUS.
But then there's the rest of the economy, where manmade rules and regulations keep inflation raging. Labor unions are standing in the way of increased port efficiency, truck drivers aren't permitted to drive longer hours, food packers can't run processing lines 24/7 to meet demand and if you want to build a new pipeline to ease natural gas prices, forget about it.
All of these are problems that could easily be solved, Cramer said, but we have a chaotic, dysfunctional system of rules here in America. These rules make our world cleaner and safer, but they come at the cost of preventing companies from quickly adapting to changing conditions. They affect inflation in a seriously negative way, he said, and that's why it's taking so long to get our supply chains under control.
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The hope is that companies will bring their manufacturing back to the U.S., but Cramer was doubtful, as the cost of our cleaner, safer world will have to be passed onto the consumer, which no one seems to want.
Reviewing the ARK Innovation ETF
It is time to again start paying attention to Cathie Wood? Wood was one of the best money managers in 2020, and among the worst in 2021, but Cramer said many of Wood's picks for her ARK Innovation ETF (ARKK) are starting to look attractive again.
Tesla (TSLA) remains Wood's top holding, and Cramer said Tesla still has no competition and this is a good level to buy. He was also a fan of Teladoc Health (TDOC) and Roku (ROKU), both of which can grow in this environment.
Cramer wasn't a fan of Coinbase (COIN) and said that Zoom Video (ZM) needs an acquisition to reignite growth, but these were the only two of Wood's picks he took issue with.
Other names Cramer recommended were Exact Sciences (EXAS), the cancer testing company, Intellia Therapeutics (NTLA), Unity Software (U) and Twilio (TWLO), which has seen its shares cut in half.
Cramer even warmed up to Draft Kings (DKNG) and Robinhood (HOOD), the trading platform that's made many missteps.
Healthy Picks Among Device Makers
Now that the selloff in growth stocks is coming to an end, it's time to start picking amongst the rubble, Cramer told viewers. There are now steals to be had among the medical device makers, for example, including Edwards Lifesciences (EW), Intuitive Surgical (ISRG) and Stryker (SYK).
All of these companies are secular growth stocks that have been annihilated with the rest of the market. Yet most of the recent weakness has stemmed from Omicron filling up hospitals and delaying non-essential procedures. These procedures are just now coming back online, making these three companies a buy.
Cramer explained that Edwards is No. 1 in every segment it's in, yet shares are down 16% from their highs. Investors panned Stryker's acquisition of Vocera Communications, but with shares now off 15%, investors are getting that acquisition practically for free. Meanwhile, shares of Intuitive Surgical are down 21% over the past three months, putting its price earnings multiples well below historical averages.
Executive Decision: Brunswick
In his "Executive Decision" segment, Cramer once again spoke with David Foulkes, CEO of Brunswick (BC), the boatmaker that just posted a top- and bottom-line earnings beat with a great outlook for the remainder of the year. Shares of Brunswick currently trade for less than 10 times earnings.
Foulkes said Brunswick has many growth levers at its disposal. Not only are they gaining market share in engines, its boat business grew by 5% and parts and accessories now accounts for 40% of revenue.
Brunswick is also benefiting from its Freedom Boat Club, which continues to gain members across the country.
Brunswick is now a dominant force in boating, and thanks to its depth, scale and vertical integration, it was able to hit 108% of planned output in engines and 95% of its original plan in boats, despite many challenges and disruptions through the year.
Lightning Round
In the Lightning Round, Cramer was bullish on Golar LNG (GLNG), Corning (GLW), Camping World (CWH), Iron Mountain (IRM) and Applied Materials (AMAT).
Cramer was bearish on Planet Labs PL.
Robinhood and Risk
In his "No Huddle Offense" segment, Cramer clarified why he's been so critical of Robinhood Markets (HOOD) lately. There's no doubt that Robinhood has done a lot to attract younger investors and make investing more approachable. But many of those investors aren't actually investing, they're trading using risky options and cryptocurrencies.
Cramer explained that Robinhood needs to do a far better job educating these younger investors on how to make money over the long term. The word "dividend" isn't a part of younger investors' vocabulary, he said, and it needs to be. Companies like UPS (UPS) soared 14% Tuesday, not only because of earnings, but also its dividend boost. Other great companies, like Wells Fargo (WFC), Ford Motor (F) and Chevron (CVX) all offer terrific dividends that both reward shareholders and protect them against big declines.
Robinhood has a special duty to educate a whole new generation of investors, Cramer concluded. Hopefully, they will rise to meet the challenge.
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