Fighting a Chill: Cramer's 'Mad Money' Recap (Tuesday 1/21/20)

Jim Cramer examines how environmental issues, earnings and the spread of coronavirus out of China could put a chill on U.S. stock sectors.
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The coronavirus, along with the other news of the day -- including earnings, impeachment, and the Davos economic forum -- will probably not have a very big impact on most investors' portfolios, Jim Cramer told his Mad Money viewers Tuesday. Some sectors, however, could feel a chill -- and that means any continued market weakness should be viewed as a buying opportunity.

Stocks started the day strong, before news broke that the first case of a coronavirus spreading out of China was confirmed in the U.S.  

The virus is bad news for travel stocks, which is why shares of Marriott (MAR) - Get Report fell 3.9% by the close. But for most stocks, it will be a non-event. That's why some stocks were still able to rally into Tuesday's weakness. We saw Beyond Meat (BYND) - Get Report surge 18.3%, and Tesla (TSLA) - Get Report and Uber (UBER) - Get Report both rise 7%. 

Cramer said he's not focusing on the coronavirus as much as the World Economic Forum in Davos. We've seen numerous statements out of the conference about climate change, he said, as more companies follow Microsoft's (MSFT) - Get Report lead on reducing carbon. With more money managers choosing to invest in green companies, the valuations for those who care about the environment are on the rise, while those that don't will begin to decline. 

Green is good for business, Cramer concluded, and that's what investors should be focused on. 

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Executive Decision: Costco

For his "Executive Decision" segment, Cramer sat down with Craig Jelinek, CEO of Costco (COST) - Get Report, the retailer with shares up 50% over the past 12 months. 

When asked for the secret to attracting nearly 100 million members to its stores, Jelinek said its because they take care of their people. Costco has a great team, he said, and they treat them well because they want them to stay with the company for a long time. 

Costco is not a high-margin retailer, Jelinek explained. They're about value and volume. Everyone wants value, he said, and it doesn't matter if they're interested in a $1 item or a $100,000 item, Costco always delivers value. 

When asked about the company's first store in Shanghai, Jelinek said they were simply not prepared for the volume of customers they received. But they've learned a lot and have been making changes to their operations to accommodate the crowds. 

Jelinek added that they're not worried about Amazon (AMZN) - Get Report. They focus instead on lowering their prices and expenses and running as efficient an operation as possible. 

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Value Trap

When is a value stock a value trap? Cramer told viewers it's when the stock is United Natural Foods (UNFI) - Get Report, the organic food distributor that has lost 90% of its value over the past five years. 

Shares of United Natural peaked in 2015 as the organic food space caught fire, but in 2018, the company acquired Supervalu, becoming one of the largest food distributors in the country. The deal put a huge strain on the company, however, and earnings have been suffering since. 

When United Natural last reported, earnings came in at just 12 cents a share. Wall Street estimates were for 26 cents share. Cramer said it's clear that the company continues to struggle integrating Supervalu into its operations while also divesting the parts it doesn't need and reducing its debt load. 

Given the company's guidance, Cramer said even their reduced estimates now seem unattainable. He said it's too late to short shares of United Natural, but investors need to avoid speculating on a quick turnaround. United Natural needs to show some earnings momentum before it becomes investable again. 

Executive Decision: Logitech

In his second "Executive Decision" segment, Cramer also sat down with Bracken Darrell, president and CEO of Logitech International (LOGI) - Get Report the computer peripheral maker that just posted a 7-cents-a-share earnings beat with a 4% rise in revenues. 

Darrell said that despite currency and tariff pressures, Logitech was still able to see strong gross margins and continues to grow all three of its businesses. Video conferencing remains strong, he said. Only 4% of all office rooms are video enabled, he said, leaving a huge opportunity for the company. That's not even including home offices, which are also slowly becoming video enabled as well. Video conferencing is more affordable and accessible than ever. 

Logitech also continues to ride the growth in gaming. While many analysts predicted a slowdown in growth after the popularity of Fortnite last year, Darrell said Logitech saw 16% growth in gaming last quarter. 

Cramer said the recent downgrades of Logitech were ill-advised, given the company's continued success. 

It it Worth it?

In his "No-Huddle Offense" segment, Cramer said he's glad the markets pulled back Tuesday, because stocks can't rise in a straight line. There are things that need to happen to justify the average stock's valuation of 22 times earnings, he said.

First, we need to see better than expected earnings this season. Stocks like Morgan Stanley (MS) - Get Report still trade at just 10 times earnings, despite reporting a terrific quarter. We also need to see continued mergers and acquisitions, along with big dividends and buybacks. All of these things will help justify current valuations. With tariffs likely to ease and bond yields likely to fall, these will also help investors feel confident that they're not paying too much for stocks. 

Lightning Round

Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Tuesday evening:

Nokia  (NOKIA) : "I think Nokia is getting better." 

Wendy's (WEN) - Get Report: "This has been stock at this level and I think you should be buying." 

Box (BOX) - Get Report: "I'm not going to rave about that one. They need a couple of good quarters in a row and they haven't delivered." 

MagnaChip Semiconductor (MX) - Get Report: "I'm only recommending Alibaba BABA when it comes to China."

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At the time of publication, Cramer's Action Alerts PLUS had a position in MSFT, AMZN.