Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Wednesday, September 26.
The market was dealing with different forces on Wednesday, namely the Fed’s interest rate hike and the tariff worries. Cramer advised investors not to trade according to every word that comes out of the Fed. “I’m not saying ‘In Fed we trust.’ That’s not me. That’s what got the bulls burned. I say ‘In Fed we trust, but verify,’ and so far, that verifying makes me think that you’ll be safe if you sit tight with a diversified portfolio rather than flitting in and out of stocks every time Jay Powell opens his mouth,” he added.
Higher interest rates are bad for the stock market but they are still lower than pre-recession levels. The economy is strong and the Fed is taking a measured approach. At such times, a diversified portfolio helps hedge against volatile moves of the market in response to Fed comments. Some money managers sold the industrial stocks and moved to the sectors that do well in a slowing economy.
On the other side of this trade were money managers who thought that the hike will not have much impact and bought into sectors like tech and retail. “Short-term interest rates are still at such low levels, just 2.25%, that the bulls simply don’t believe a quarter-point tightening can derail the economy,” said Cramer.
As the economy gets hot, the Fed uses interest rates to keep inflation under control. This situation is different from 2008 as rates are still low, the economy is strong and the longer-term rates went lower.
Have a diversified portfolio and invest in stocks that have nothing to do with rate hikes or tariffs. Don’t get caught up in the market’s hourly movements.
Old is gold?
When there is nothing new to trade, the market looks at the old. It’s a classic case of rotation into sectors that were left earlier due to lack of growth. When the market looks for growth, they re-look at sectors with the current worldview.
The retail sector saw money coming into it after a research report that said the mall is not dead. It said that the merchant talent, brand power and product positioning along with the strength of the mall is still doing well for many companies.
Stocks like TJX Companies (NYSE:TJX) which is up 46% for the year, Burlington Stores (NYSE:BURL) up 34% and Canada Goose (NYSE:GOOS) +100%. “Believe it or not, I think Canada Goose is best of the bunch simply because we’re going into the best time of the year for this maker of fancy fur-lined coats and parkas. I know Canada Goose has been diversifying away from winterwear, but this is still the season they’re practically synonymous with,” said Cramer.
CEO interview – United Continental (NASDAQ:UAL)
The stock of United Continental has bounced back after the PR scandal. Cramer interviewed CEO Oscar Munoz to find out what lies ahead after the stock has moved up 25% in the last three months.
They are trying to heighten United’s focus on the customer and their 90,000 employees are their best asset. Commenting on earnings growth and hiking baggage fees, Munoz said that it’s important to strike a balance. “It’s important to reinvest in the business. I think it’s one of the things about this industry that people, our customers, don’t always understand. All that money that we’re getting back is being piled back into the business,” he added.
He thinks the overcapacity will not be an issue if the correct balance is sought. “We want to make you, as our customer, feel good about flying us. And so our customer-centricity, our customer properties, are something we really want to sort of engage,” he added.
The company has a lot planned for next year when they roll out a new customer engagement initiative. “Trust is the underpinning of a lot of things that we do and that doesn’t compute, as you know, on spreadsheets,” he concluded.
Viewer calls taken by Cramer
Dow DuPont (NYSE:DWDP): Sit tight and do some buying because the upcoming split of DowDuPont will make a lot of money.
Urban Outfitters (NASDAQ:URBN): They have a great handle on fashion. Buy on weakness.
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