Tesla and the Market: Cramer's 'Mad Money' Recap (Thursday 10/22/20)

Jim Cramer looks at how Tesla's performance mirrors the stock market.

If you want to understand this seemingly unstoppable stock market, you need to look no further than Tesla  (TSLA) - Get Report, Jim Cramer told his Mad Money viewers Thursday. For years, the Wall Street analysts told us Tesla was doomed. Turns out, they were dead wrong.

When Tesla reported earnings after the bell yesterday, they delivered a blowout quarter that only individual investors and Tesla's true believers thought possible. The company had its best quarter ever, with record production, deliveries, revenue, earnings and free cash flow. It also reaffirmed its plans to build 500,000 electric vehicles this year.

Cramer said Tesla has left all of the old-school automakers in the dust. The company doesn't even advertise, it doesn't need to. It also doesn't need dealerships to sell its cars, the cars sell themselves.

Tesla is now the world's most valuable automaker by market cap, larger than Toyota, even though Toyota produces 20 times as many cars. But Tesla shares trade at just 13 times earnings. With 39% revenue growth, Cramer said the company deserves every bit of that valuation and more.

The analysts only focus on what happens if Tesla gets it wrong. They continually misjudged the opportunity the company had if they got it right.

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Executive Decision: Nucor

In his first "Executive Decision" segment, Cramer spoke with Leon Topalian, president and CEO of Nucor  (NUE) - Get Report, the steelmaker with 27,000 employees across the country.

Topalian said Nucor is poised and ready to return value to shareholders. He said they've built their business to thrive even in cyclical markets like this one.

When asked about being perceived as a dirty steel maker, Topalian responded that Nucor is actually the largest recycler in the country. A full 70% of their input materials are recycled, while 100% of everything they manufacture can be recycled. They are constantly improving their processes and lowering their environmental impact.

Nucor is making big investments into the auto market. Topalian noted that they plan to double their output for automotive steel, with all of the latest high-grade materials.

Finally, Topalian reiterated the importance of having a level playing field when it comes to trade. He said one of the silver linings of this pandemic has been that America is seeing that it can no longer be dependent on China and others for vital products like pharmaceuticals and steel. 

Electric Vehicles

With Tesla TSLA posting record earnings, EV makers are becoming all the rage. Cramer spoke with Henrik Fisker, which will be merging with a special purpose acquisition company, or SPAC, next week. Tonight, he highlighted another electric vehicle SPAC, the combination of QuantumScape with Kensington Capital Acquisition KCAC.

All current electric vehicles use lithium ion batteries, but QuantumScape is developing the next generation of solid state batteries. Solid state promises to offer longer range and faster charging than current technology. The company has the backing of some high profile investors, including VW and Bill Gates.

With a combined valuation of $3.3 billion, Cramer said QuantumScape will be well capitalized. The only problem, the company doesn't expect to be producing batteries at scale until 2026. Cramer said he'd invest in QuantumScape only for speculation, but even then, there's no urgency to do so. 

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Am I Diversified?

In the "Am I Diversified" segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors' portfolios have what it takes for today's markets. The first portfolio included Shopify  (SHOP) - Get Report, Humana  (HUM) - Get Report, Square  (SQ) - Get Report, Facebook  (FB) - Get Report and Amazon  (AMZN) - Get Report. Cramer suggested swapping our Square for an industrial like Honeywell  (HON) - Get Report in order to properly diversify this portfolio.

The second portfolio's top holdings included Visa  (V) - Get Report, Fair Isaac  (FICO) - Get Report, American Tower  (AMT) - Get Report, Kansas City Southern  (KSU) - Get Report and Digital Realty Trust. Cramer suggested selling American Tower and also adding an industrial like Honeywell.

The third portfolio had Gilead Sciences  (GILD) - Get Report, Roku  (ROKU) - Get Report, Yum Brands  (YUM) - Get Report, Qualcomm  (QCOM) - Get Report and Activision Blizzard  (ATVI) - Get Report as its top five stocks. Cramer blessed this portfolio as properly diversified.

The fourth portfolio's top stocks were Citigroup  (C) - Get Report, Bank of America  (BAC) - Get Report, General Electric  (GE) - Get Report, Alaska Air  (ALK) - Get Report and Walt Disney  (DIS) - Get Report. Cramer said this portfolio was not diversified. He suggested selling Citigroup and adding a drugmaker like Bristol-Myers Squibb  (BMY) - Get Report.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer said buying stocks is a lot like buying real estate. Location matters. Even the worst house in a good neighborhood is better than a great house in a place no one wants to be.

The auto industry is once again becoming a good neighborhood, as your car is proving to be one of the safest ways to travel in a world with masks and social distancing. Cramer said there are a number of ways to play the bull market in autos. He once again recommended Lithia Motors  (LAD) - Get Report and Sonic Automotive  (SAH) - Get Report. In auto parts, he liked Axalta  (AXTA) - Get Report and Adient  (ADNT) - Get Report. For semiconductors, Cramer went with  (NXPI) - Get Report Semiconductors NXPI and his long-time fav, Nvidia  (NVDA) - Get Report.

When it comes to electric cars, of course there's Tesla and Fisker, but when it comes to traditional automakers, Cramer picked Ford  (F) - Get Report, a stock that's been hated for years, but may finally be turning itself around. 

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Lightning Round

In the Lightning Round, Cramer was bullish on Corsair Gaming  (CRSR) - Get Report, Marvell Technology  (MRVL) - Get Report, Bristol-Myers Squibb  (BMY) - Get Report, Canadian Solar  (CSIQ) - Get Report, Union Pacific  (UNP) - Get Report and Estee Lauder  (EL) - Get Report.

Cramer was bearish on Royalty Pharma  (RPRX) , Pfizer  (PFE) - Get Report and Revlon Inc  (REV) - Get Report.

At the time of publication, Cramer's Action Alerts PLUS had positions in FB, HON, DIS, BMY and AMZN.