It's time to start shifting the weight in your barbell portfolio from the COVID-19 stocks to the recovery stocks, Jim Cramer told his Mad Money viewers Tuesday. That means start lightening up on stocks like Zoom Video (ZM) - Get Report and big tech, and start adding Honeywell (HON) - Get Report and DuPont (DD) - Get Report.
Cramer explained that we are in the depths of the trough, which is a dangerous place for the markets to be. If you don't act soon, you may miss the move, he cautioned.
Why is this rotation different? There are 12 signs Cramer's paying attention to. He said gold prices are falling, interest rates are rising and oil is holding in the low $40s a barrel -- for starters. We're also seeing an uptick in travel, commercial rent payments and auto sales.
Then there are individual stocks that have caught Cramer's attention. Boeing (BA) - Get Report shares are up on disappointing news. Honeywell rallied despite a downgrade, and Caterpillar (CAT) - Get Report continues to make moves with no news at all. Cramer's also paying attention to the banks, the freight companies and, in the apparel space, Nike (NKE) - Get Report. With all of these names rallying, this move might be for real.
Cramer said it's too early to sound the all-clear, but by the time the all-clear comes, it may already be too late to buy.
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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Thank the Fed for Quick Action
Stop worrying about the Federal Reserve distorting the market and just be thankful they have a heart, Cramer told viewers. Without the Fed's intervention, countless companies would have gone bankrupt and we'd have depression-level unemployment. But thanks to the Fed's quick actions, we have a stock market that's approaching new highs.
The Fed is the reason a stock like Royal Caribbean Cruises (RCL) - Get Report could report a 93% decline in revenue and a $1.6 billion loss but still see its shares rally 2.3%. The company may point to strong bookings for 2021 and their ability to renegotiate with vendors, but Cramer said there's only one reason this company is alive, and it's the backstop provided by the Federal Reserve.
Many purists cry foul when the Fed manipulates the market, but Cramer pointed out that's the Fed's job. They tap the brakes when the economy gets too hot, hit the gas when it goes too slow and they floor it when disaster strikes to avoid things getting a whole lot worse.
Executive Decision: Owens & Minor
In his first "Executive Decision" segment, Cramer spoke with Ed Pesicka, president and CEO of Owens & Minor (OMI) - Get Report, the protective equipment maker that saw shares dip after it reported earnings only to see them rally 7.6% Tuesday. Shares of Owens & Minor currently trade at just 15 times earnings.
Pesicka said Owens & Minor continues to focus on America's shortage of PPE and other healthcare supplies. He said their team initially worked hard to increase the output of their existing product lines for items like N95 surgical masks. Over time, they were able to add up to 50% more output from existing equipment. They are now adding new capacity to their factories and those machines are coming online ahead of their six-month targets.
When asked how to beat the shortage of PPE, Pesicka explained that it will take both stockpiling and excess capacity to beat this problem. He said the stockpiles will be available for initial responses, giving the additional capacity time to ramp up to meet future demand.
PPE will be needed long after COVID-19, Pesicka explained. N95 masks are being used more not only by healthcare professionals, but also in many industries outside of healthcare. With so many new protocols in place, protective equipment will always be in demand.
Owens & Minor is also working hard to pay down debt, with Pesicka noting the company has retired 20% of their debt over the past five quarters.
Cramer said Owens & Minor remains in the sweet spot of this market.
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Executive Decision: Federal Realty Trust
For his second "Executive Decision" segment, Cramer also spoke with Don Wood, president and CEO of Federal Realty Trust (FRT) - Get Report, the shopping center REIT that missed on earnings with only 76% rent collection. Shares of Federal Realty currently yield 5.1% after the company raised its payout by a penny.
Wood said what's most important right now for Federal Realty shareholders is their dividend, a payout they've been making consistently for 53 years. He said Federal Realty was built to endure tough times like these and that's exactly what it's doing.
When asked how a shopping center REIT can survive in a world where too many retailers are going bankrupt, Wood explained that America was over-retailed to begin with and the weakest players are indeed struggling. But, he said, that creates opportunities for stronger players to move into quality, A-list shopping centers, the kind that Federal Realty specializes in.
Not everyone will be a winner, Wood admitted, but Federal Realty is already looking toward 2021 and beyond, and the company sees opportunities that don't exist for enclosed mall operators.
Executive Decision: Salesforce Foundation
For his final "Executive Decision" segment, Cramer checked in Ebony Beckwith, Salesforce.com's (CRM) - Get Report chief philanthropy officer and CEO of the Salesforce Foundation. The foundation just unveiled its Work.com platform for schools to help schools open safely and make better data-driven decisions.
Beckwith said there's no doubt this pandemic has been challenging for both parents and students alike, from kindergarten through college. Everything from physical health to emotional wellbeing is at stake.
That's why Salesforce is making the Work.com platform available to schools with features like the student success hub. The hub provides administrators with a command center to manage schedules and facilities and aid with contact tracing in the event of an outbreak.
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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At the time of publication, Cramer's Action Alerts PLUS had no position in the stocks mentioned.