Saturday, October 20, 2018

Cramer Remix: Patience is key in today's market

Comcast Corp. may be paying a lofty price to buy European cable operator Sky PLC, but the market is reacting far too harshly to what could be a very lucrative deal for Comcast, CNBC's Jim Cramer said Monday.

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"The textbook example of Wall Street's aversion to long-term thinking is really the stock of Comcast, the parent company of this network, down 6 percent today," the "Mad Money" host said. "Because many investors despise long-term investments, the stock had its worst day in nearly three years."

While he thought the narrative around Comcast's interest in buying Sky had been muddied by unfounded worries around cord-cutting, Cramer could understand why investors were concerned.

In Comcast's last two major acquisitions — buying AT&T Broadband in 2001 and buying NBCUniversal, parent to CNBC, in 2009 — investors were equally shaky, Cramer said. After each deal, shares of Comcast tanked roughly 7 percent because "the deals were viewed as too expensive and too risky," he said.

But since the AT&T deal, Comcast's stock has not only recovered, but built on its gains, giving investors a total return of 392 percent versus the S&P 500's 349 percent gain. Since the NBCUniversal deal, Comcast is up 425 percent versus the S&P index's 220 percent.

"On Wall Street, the two most dreaded words in the English language are 'long' and 'term,'" Cramer joked. "When you start talking about long-term earnings, the hedge fund guys will smile, they'll nod and then they'll rush to sell your stock."

In the case of Comcast, however, short-term-focused investors have long been proven wrong, the "Mad Money" host said.

"I think these bears have got it backwards: long-term thinking is essential; short-term thinking is dead-end," Cramer said.

For more of Cramer's analysis on the Comcast-Sky deal, click here.

J.P. Morgan CEO talks policy, running for office

Jamie Dimon, CEO of JP Morgan Chase.

In a time when CEOs and non-political figures seem to be exploring presidential bids, J.P. Morgan Chase & Co. Chairman and CEO Jamie Dimon told CNBC that he's content with staying on the sidelines.

Referencing his earlier statement that he could beat President Donald Trump in an election, Dimon once again walked back the comment in a Monday interview with Cramer.

"It was on my mind because people mentioned it, but it's not what I want to do," he said in the interview. "I don't think I would be good at it. I'm not a political person, per se."

And besides, "I think it's probably too soon for a banker" to run for president, the CEO said.

Instead, Dimon, who has run J.P. Morgan for over a decade, said he wanted to turn his focus to "policy that matters," pointing to "seriously policy issues" around infrastructure, taxation, regulation, education, neighborhood development, affordable housing, opioids and income inequality.

To watch and read more about Dimon's interview, click here.

Know your IPO: Elanco Animal Health

Jeff Simmons, president and chief executive officer of Elanco Animal Health Inc., center, applauds while ringing the opening bell on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Sept. 24, 2018.

Cramer has long backed the "humanization of pets" theory — the notion that how much people spend on their pets is continually rising — but the latest animal-focused entrant to the public market did not fit Cramer's bill.

Last week, pharmaceutical giant Eli Lilly spun off Elanco Animal Health via an initial public offering. A drug and vaccine developer, Elanco is a leader in medicinal feed additives, with 63 percent of its sales coming from food animals like chicken.

And while investors sent shares of Elanco up 50 percent in their first trading day, Cramer wasn't as thrilled about the company's prospects.

"As much as I like corporate breakups and the humanization of pets and the rising popularity of chicken and other proteins, I can't recommend Elanco [Animal] Health right here, versus, say, Zoetis for value or Idexx for growth," Cramer said, noting two of his favorite competitors.

For Cramer's main points of hesitation on Elanco, click here.

ESPN's Adam Schefter on new book about 9/11

Adam Schefter

Many know Adam Schefter as one of the nation's leading sports reporters, but the ESPN journalist's recent book "The Man I Never Met" sheds light on a more sobering part of his family's past.

The book, an extension of an article Schefter wrote for ESPN commemorating the 15th anniversary of 9/11, takes an inside look at the life of Joe Maio, Schefter's wife's ex-husband who perished during the attack.

"I can't imagine that there are very many people who have ever written a book about their spouse's first spouse, certainly not in a flattering way," Schefter told Cramer in an exclusive interview. "This book is a way to honor Joe's memory, to give his son a chance to better know his father, his biological father, and for everybody to get to know the great Joe Maio. And this was a great man, Jim."

Schefter added that the book is not only a tribute to his wife and to Joe, but a message "that life does go on, that there is hope after grief [and] that there are heartwarming stories that come out of heartbreak."

"It goes to show you that life is not some Instagram post that we see every day where everything is great and joyous and happy all the time. We have a lot of happiness in our life. We all do. But there's some sadness and there's some reality as well," Schefter said.

To watch his full interview, click here.

The big misunderstanding with buybacks

Few things get Cramer more riled up than when journalistic reports assume that individual investors "are too dumb to understand the workings of the stock market," the "Mad Money" host said Monday.

"That's my take every time I read another story bemoaning the fact that buybacks artificially inflate a company's earnings per share, making them inherently phony," he told viewers.

Cramer referenced reports that suggested corporate share buybacks were "manufactured" by companies to boost earnings per share. The key thing they were missing was the fundamental idea that buybacks help taper market demand by "sopping up supply," he argued.

"There's only so much supply of stock to go around, and this voracious demand keeps pushing us higher. Layer in the mergers and acquisitions in the S&P 500 and the lack of new equity issuance by companies in that index and the misunderstood buybacks, and you've got the makings of a genuine stock shortage," he said.

So, while buybacks can artificially boost a company's earnings-per-share growth, they have the power to boost share prices in a market where index fund buying is drastically reducing the amount of stock available, Cramer argued.

Here's how legendary investor Warren Buffett views the long-term power of buybacks.

Lightning round: International Paper and the straw debate

In Cramer's lightning round, he shared his take on callers' favorite stocks:

International Paper Company: "[The plastic straw issue] makes tons of sense, but I've got to tell you, it has not translated to earnings. Why? Because people feel there's too much capacity coming on. A lot of times when you can't see the capacity coming on, like with Micron – that's what happened to Micron's stock, which you know I think has bottomed – you end up being in a situation where you say, 'Wow, what is the hidden problem here?' It's capacity."

Nokia: "I don't have a catalyst. I don't know why I should recommend it other than a 4 percent yield and, frankly, that's not enough to pull the trigger for."

Disclosure: Cramer's charitable trust owns shares of Comcast and J.P. Morgan.

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