After a meteoric rise from their March lows, the markets are stretched pretty thin, Jim Cramer warned his Mad Money viewers Thursday. Without more fuel to keep the rally burning, May could prove to be another difficult month for stocks.
Cramer said there were four factors fueling the markets. First was simply an unsustainable amount of negativity. Toward the end of March, stocks were oversold to historic levels, making a strong bounce back to normal a certainty.
The second factor was the Federal Reserve' aggressive approach to adding liquidity to the markets by any means necessary. This approach was not present in past financial crises, but today, it provided companies with the aid they needed.
The third factor driving stocks higher was the realization that our healthcare system wasn't going to be overrun by COVID-19 patients. Social distancing and quarantine efforts have been working, flattening the curve to manageable levels.
Finally, and most recently, there are newfound hopes for treatments, like those from Gilead Sciences (GILD) - Get Report. Anything that makes COVID-19 not a death sentence is a big win for investor confidence.
But Cramer said all of these factors are how we got to current levels and they're already fully priced into the market. The only thing we have to drive stocks higher are earnings, he said, and earnings alone won't be enough.
Thursday both Apple (AAPL) - Get Report and Amazon (AMZN) - Get Report reported strong quarters, but with Amazon investing heavily to meet demand and Apple suspending its guidance, both stocks ended the day lower. That's why investors aren't likely to be impressed by the rest of earnings season.
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Executive Decision: Align Technologies
For his first "Executive Decision" segment, Cramer spoke with Joe Hogan, president and CEO of Align Technologies (ALGN) - Get Report, the digital orthodontic service with shares that are down 23% for the year.
Hogan reminded viewers that Align is a fully customized business, and all of their aligners are made to order. He said while most markets remain in varying states of quarantine, China is about 5% back online. The Chinese market represents about 8% of Align's revenues.
When asked about the probability of increased competition or knockoffs, Hogan explained that their market is only 10% penetrated, leaving room for multiple players in their space. That said, he noted that it is very difficult to replicate Align's end-to-end solution from scanners to algorithms to 3D-printing technology.
Looking longer-term, Hogan said Align's system is likely to move from a "nice-to-have" to a "must-have" solution, as they require fewer visits to the dentist, making it an ideal solution for continued social distancing.
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Know Your IPO : Reynolds
Cramer said in this market, it pays to be cautious and that means with consumer packaged goods companies. Many investors already have Clorox (CLX) - Get Report, Colgate-Palmolive (CL) - Get Report, Procter & Gamble PG and Kimberly-Clark (KMB) - Get Report in their portfolios, but Reynolds was sold to private equity by Alcoa (AA) - Get Report in 2007 and is once again publicly traded.
Sales have been flat to down over the past few years at Reynolds, hovering around $3 billion. The company has been making strides on the bottom line, however, last year posting net income of $225 million. Reynolds has also been paying down debt and shoring up its balance sheet.
Reynolds gets 98% of its revenues from the U.S., leaving lots of opportunities to expand overseas. It owns its namesake, Reynolds Aluminum foil, plus Hefty trash and storage bags as well as private label brands. Reynolds is the private label supplier for Amazon.
Trading at just 18 times earnings, Cramer said Reynolds is a buy given how much aluminum foil and trash bags are in our post-COVID world.
Executive Decision: Juniper Networks
For his second "Executive Decision" segment, Cramer spoke with Rami Rahim, CEO of Juniper Networks (JNPR) - Get Report, the network equipment provider that has fallen over 10% since it reported a solid quarter on Tuesday.
Rahim explained that Juniper has been transforming itself over the past year, doubling down on cybersecurity. This quarter saw the fruits of that labor, with 10% growth overall including growth in every geographic region and customer segment. He said the main problem this quarter was supply constraints, but he expects their factories to be at 100% capacity by the end of the second quarter.
Rahim said that Juniper and its peers are the keepers of the global network that we all depend on in our new work-from-home world. Juniper equipment is on the front lines in hospitals, government facilities and powers many colleges and universities that are now providing 100% online learning for students.
Looking past COVID-19, Rahim said they're very excited for the company's 5G wireless rollout. He said Juniper has equipment to handle the transport and security of 5G wireless.
Cramer said that with almost a 4% dividend yield, he likes what he hears from Juniper Networks.
Stocks Worth Owning Now
In his "No-Huddle Offense" segment, Cramer said it's impossible to value most of the stocks in the COVID-19 blast zone, so why bother?
As the markets were plunging, hedge funds made fortunes off of the airlines, cruise lines, hotels, restaurants, retail and oil stocks. These sectors were like shooting fish in a barrel. But as the bottom finally came, maybe funds got greedy, leading to the short squeeze that kicked off our recent rally.
That leaves investors with a new question. What are these sectors really worth? If a vaccine comes quickly, it makes sense to buy travel, leisure and the restaurants, Cramer said. But even if a vaccine comes early next year, that would be the fastest vaccine developed in the history of vaccines.
Why take that risk, Cramer asked? There are plenty of stocks with good yields that are not beholden to a quick recovery. Those are the stocks worth owning in this environment.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
Royal Dutch Shell (RDS.A) : "They just cut their dividend for the first time since World War II. No thank you."
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At the time of publication, Cramer's Action Alerts PLUS had a position in AMZN, AAPL, CLX, COST.