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Focus on Financials: Cramer's 'Mad Money' Recap (Wednesday 8/19/20)

Jim Cramer says the stock market is a forecasting machine, not just a snapshot of current conditions. What's it saying? Watch the financials.
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Are we at the beginning of the fabled V-shaped economic recovery? Not so fast, Jim Cramer told his Mad Money viewers Wednesday. There are certainly signs of strength in the stock market, Cramer said, but he remained skeptical that a V-shaped recovery is possible until the financial sector shows one.

He noted that the stock market is out of sync with the current economy, but it can be a forecasting machine. 

Cramer said he's been encouraged by a number of recent positive data points. We're seeing strength in commodities, strength in housing, and the Nasdaq continues to soar on the heels of Apple  (AAPL) , Amazon  (AMZN) , Microsoft  (MSFT)  and everything to do with the cloud.

We're also seeing strength in big-box retail, with Walmart  (WMT) , Target  (TGT) , Home Depot  (HD)  and Lowe's  (LOW)  all reporting strong earnings. But Cramer said when you look closely at the Target conference call, you begin to understand why. Target reported $5 billion in market share gains, gains which came at the expense of every retailer deemed non-essential. Target also noted that sales began to slow as stimulus checks dwindled.

Cramer said these data points mean that the rally in the stock market might be short-lived without additional government stimulus, additional COVID-19 therapeutics or a vaccine.

For the market rally to be real, Cramer said it must be reflected in the financials, a group that has not been rallying as it instead prepared for a wave of defaults and bankruptcies. Without the financials, he said, this rally is either digital or artificial and it may not last.

Cramer and the AAP team are looking at everything from earnings and tariffs to the Federal Reserve. Find out what they're telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts Plus.

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Executive Decision: Linde

In his first "Executive Decision" segment, Cramer spoke with Steve Angel, CEO of the industrial gas provider Linde  (LIN) .

Linde operates a number of different business units, Angel explained. Linde's oxygen is used for medical care and to make steel, nitrogen is used in the manufacturing of semiconductors and hydrogen is used in oil refining and as a fuel source.

Over the past six months, Linde's Lincare medical unit has gone from treating zero to over 25,000 COVID-19 patients. Angel said Lincare offers hospitals a critical tool for in-home respiratory care and treatments and Lincare is a full-service respiratory home care solution.

Angel was also bullish on hydrogen. He said Linde has the capability to produce, store, transmit and liquify hydrogen and also operates hydrogen refueling stations. The company is also investing in "green" hydrogen, which is manufactured without a carbon footprint, instead of from natural gas as it is produced today.

Angel added that if just 1% off all U.S.-based long-haul trucks converted to natural gas, it would create a $20 billion market for Linde.

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The Analyst's Dilemma

What do you do when a stock you're recommending hits your price target? Do you take a victory lap and issue a downgrade to sell? Or do you increase your target with a price bump?

Cramer said these questions are the analyst's dilemma. At his charitable trust, Action Alerts PLUS, Cramer said he splits the difference, taking profits while letting the rest run. But for analysts, the answer too often is following the momentum.

Just today, we saw price target bumps for Walt Disney Co.  (DIS) , Palo Alto Networks  (PANW) , Nike  (NKE) , Target and Home Depot. But Cramer said all of these analysts are simply chasing hot stocks that have been rallying for weeks.

Unless there's something new at work, Cramer advised disregarding these numbers. These blind bulls won't be there for you when it's time to sell, he concluded, that's why it's up to you to lock in your gains when your targets are reached.

Executive Decision: At Home Group

For his second "Executive Decision" segment, Cramer also spoke with Lee Bird, chairman and CEO of At Home Group  (HOME) , the home decor superstore with shares that are up over 1,500% from their March lows. Shares of At Home still trade for just 13 times earnings.

Bird said consumers are still nesting. As they spend more time at home, they're spending more on their home, he said, which has led to a 40% increase in same-store sales. At Home's stores are large, with wide aisles, great sanitation and employees wearing masks, all of which kept customers feeling comfortable shopping with them.

Additionally, At Home has implemented curbside pickup and delivery options to complement their online operations, Bird said, but most customers still prefer to see their items in store before making a home decor purchase.

When asked about tariffs, Bird noted that At Home has been effectively dealing with tariffs since the beginning, but they also continue to diversify manufacturing and sourcing outside of China.

Executive Decision: Analog Devices

For his final "Executive Decision" segment, Cramer checked in Vince Roche, president and CEO of Analog Devices  (ADI) , the semiconductor maker that has agreed to acquire rival Maxim for $68 billion.

Roche said that Analog Devices is well-positioned for the coming 5G wireless rollout. His company was at the forefront of 2G, 3G and 4G wireless and has the expertise and know-how to increase power and throughout while decreasing costs and footprint.

Roche added that each generation of wireless is more complex than the last, requiring more channels and antennas that translates to huge opportunities for Analog Devices.

Analog Devices is also a major player in automotive technology. Roche explained that semiconductors and software are what will define the future of cars. In the area of electric cars, his company is very active in battery management technologies.

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 Wednesday evening:

SmileDirectClub  (SDC) : "If you want telemedicine you want Livongo Health  (LVGO) ."

2U  (TWOU) : "Why not just buy Spotify  (SPOT) ?"

PetMed Express  (PETS) : "I don't think you're going wrong with pets. I also like Chewy  (CHWY) ."

1Life Healthcare  (ONEM) : "There are so many of these companies. I don't want that right now."

Tyson Foods  (TSN) : "I think they made a mess of things. I can't recommend it."

Switch  (SWCH) : "Data centers are where you want to be."

Sonos  (SONO) : "This is a good company but you're gonna have to wait until next quarter."

Activision Blizzard  (ATVI) : "I think they're going to have a fantastic holiday season. It's a wild trader, so strap yourself in for the ride."

Aphria  (APHA) : "This one is OK but these Canadian stocks are hard to own."

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