There's a new dynamic in the markets and it's the fundamentals against the "fear-a-mentals", Jim Cramer told his Mad Money viewers Tuesday. On one side are the companies with strong earnings and excellent execution. On the other side are fearful investors assuming that everything that can go wrong, has gone wrong.
No stock better exemplifies this new dynamic than United Technologies , a company that on the surface has exposure to Boeing's (BA) - Get Report 737Max, the coronavirus in China and stagnant defense spending. Cramer said investors were expecting the worst from United Technologies, but instead the company posted a exemplary quarter and CEO Greg Hayes took time on the conference call to reassure investors.
On the call, Hayes explained how United Technologies performed during the 2003 SARS epidemic, using that as a guide for how they expect to perform during the coronavirus outbreak.
When asked about Boeing, Hayes reminded investors that they have a backlog of 10,000 engines and every engine they produce will be sold.
That's how the fundamentals can overcome the fear-a-mentals, Cramer concluded, and it's the same playbook used by Apple (AAPL) - Get Report, Starbucks (SBUX) - Get Report and countless other well-run companies.
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Betting on Winners
Football can be a great analogy for the stock market, Cramer told viewers. And with the Super Bowl just around the corner, Cramer looked into the auto sector to compare the tried-and-true giants of Ford (F) - Get Report and General Motors (GM) - Get Report to upstart Tesla (TSLA) - Get Report.
Cramer said most football stars aren't stars overnight. They begin with long careers in college and sometimes play for several pro teams before they hone their craft and become great. That's been the case with Tesla, a stock with more than its fair share of doubters and skeptics. But for years Tesla continued to play the game and now, with shares up 72% over the past 12 months, has finally silenced most of its critics.
Meanwhile, Ford and General Motors, two stocks that used to be great, are now stagnant. GM's shares have been stuck in the $30s for years, while Ford has been cut in half. The problem? Growth. Auto sales peaked a few years ago in the U.S. and with the rise of ride sharing and sky-high new car prices, the only growth is in the used car space... unless you're Tesla.
Cramer said Tesla is a $102 billion tech giant on wheels and the company deserves a market cap larger than Ford and GM combined. As long as the company continues to deliver on earnings, shareholders will be rewarded.
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Madison Square Garden
The plans call for Madison Square Garden to break itself into two parts: One will own and operate its venues and arenas while the other will own the sports teams, the New York Knicks and Rangers. But while Cramer is often a fan of breakups to unlock value, he said there's no reason to own the Knicks or the Rangers, especially at the current projected valuations.
Not all sports teams are created equal, Cramer said, and the Knicks have lost 70% of their games over the past five years. Madison Square Garden also has a dual-class structure that will convey to the new companies, giving shareholders no voting rights to force changes. As for the venues and arenas, we still don't know enough about the deal to properly value them.
Cramer said he wouldn't be a buyer of Madison Square Garden before the split until we know more. There are a more exciting places you can put your money in the meantime.
Executive Decision: Masimo
For his "Executive Decision" segment, Cramer spoke with Joe Kiani, chairman and CEO of Masimo (MASI) - Get Report, to discuss the battle brewing over health data privacy and electronic medical records. Epic Systems, a privately-held medical software provider, began lobbying U.S. hospitals to oppose new regulations standardizing medical records, angering patient's rights advocates.
Kiani said he understands the desire to hoard data and not share it, because Masimo used to have the same policy. But over time, the company has learned that sharing data saves lives. Patients are harmed when doctors and hospitals don't have all of the information they need to diagnose and treat the problem.
Kiani added that privacy always needs to be balanced with saving lives and patients ultimately should decided how their data gets used. He rejected the argument that data can't be transmitted securely. There are protections in place and there are plenty of companies that can use this data for research, to control costs and ultimately to keep people healthy. Nobody wins with incompatible records that are locked away in silos.
Caution, not Panic
In his "No-Huddle Offense" segment, Cramer said investors are right to be worried about the coronavirus because we still don't really know how bad the epidemic is or how far it will spread. The market hates unknowns, he said, and there are still many questions surrounding how well the Chinese are responding to the outbreak.
However, concern should not escalate into panic, Cramer cautioned. The markets have weathered Chernobyl, SARS, Ebola and many other health threats over the years and they almost always end up being buying opportunities. Until this virus is contained however, Cramer said investors should be looking at high-quality companies that aren't affected by the virus.
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:
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