It's about time the market took a breather, Jim Cramer told his Mad Money viewers Thursday. Catching your breath every once and awhile is a good thing, Cramer continued, because it prevents bigger selloffs.
There was a lot to like on Wall Street Thursday, including Morgan Stanley (MS) - Get Morgan Stanley Report buying E-Trade Financial (ETFC) - Get E*TRADE Financial Corporation Report. Cramer said this combined company is going to make a ton of money and be able to compete against upstart Robinhood and its zero-commission trading. Investors also applauded the latest economic numbers from the Philadelphia Federal Reserve, which pointed to a revival in American manufacturing.
The markets were also bullish on Wednesday's Democratic debate, where Michael Bloomberg's disappointing performance made investors more confident of a Trump victory in November.
Cramer reminded viewers that there's still plenty to be bearish about. Procter & Gamble (PG) - Get Procter & Gamble Company Report warned investors that they will see a material slowdown in China due to the coronavirus. The virus also continues to plague the hotels, airlines and cruise lines, with Norwegian Cruise Line Holdings (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report plunging 6.7%.
Finally, Cramer was bearish on Viacom CBS (VIAC) , which fell 17.8% on abysmal earnings that had Cramer thinking he might have to add the company to his "Wall of Shame".
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.
Executive Decision: Domino's Pizza
For his "Executive Decision" segment, Cramer spoke with Ritch Allison, CEO of Domino's Pizza (DPZ) - Get Domino's Pizza, Inc. Report, the pizza chain that soared $76.06 a share to close at $373.16 on Thursday -- up 25.6% -- on blowout quarterly earnings.
Allison said after weak results in the previous quarter, Domino's came back by keeping the focus on driving the business forward. The company's carry-out business continued to grow and Allison noted that while the average tickets are lower for carry-out, so too is the cost of service, which ultimately leads to better gross margins than delivery. One of the challenges Domino's faces is the cost of getting food to customers.
Domino's also continues to see strength in its loyalty program, which now includes over 25 million active members. Allison said the program represents a huge untapped opportunity for Domino's as they haven't even begun to offer targeted offers to loyalty members yet.
Turning to the topic of China, Allison said that while only a handful of Domino's locations are closed in China, they are taking precautions and are performing contactless deliveries to ensure no viruses are spread to or by Domino's employees.
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Perspective on the Coronavirus
Honestly is always the best policy, even when it's ugly and scary, Cramer reminded viewers. That's why it makes sense for investors to consider the risks and consequences of a coronavirus outbreak here in the U.S.
While the seasonal flu kills far more people than the Covid-19 coronavirus has so far, it's important to note that we have no vaccine for Covid-19, and anti-viral medications for it are still being tested. That means should the U.S. see a major outbreak, people are likely to avoid public places, including malls, hotels, restaurants, concert venues, airports and more. Could this have a serious effect on our economy? You bet.
Cramer said it's difficult to trust the numbers coming out of China, so we really don't know if the virus has been contained or is just getting started. That's why it's prudent to at least consider the worst-case scenario before blindly investing in the stock market.
While investors continue to discount the seriousness of the coronavirus, Cramer said he's looking for what the industry calls "uncorrelated returns," or stocks that can deliver no matter what happens with the Covid-19 outbreak. One way to get uncorrelated returns is with biotech, Cramer said, and in particular, Vertex Pharmaceuticals (VRTX) - Get Vertex Pharmaceuticals Incorporated Report, a stock that's up 30% for the year.
Vertex has perhaps the brightest future in all of biotech, Cramer explained. The company's drug for cystic fibrosis, Trikafta, was approved in October and the company wasted no time getting it in the hands of patients. While analysts forecast sales of $95 million for Trikafta last quarter, Vertex stunned Wall Street with sales of $420 million. Earnings per share trounced estimates of $1.20, with Vertex delivering earnings of $1.70 per share.
Trikafta is only the beginning for Vertex, which has several other drugs in development.
Cramer said it's not too late to invest in Vertex, which trades for 23 times earnings but has tremendous growth.
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 Amazon (AMZN) - Get Amazon.com, Inc. Report, Cisco Systems (CSCO) - Get Cisco Systems, Inc. Report, Johnson & Johnson (JNJ) - Get Johnson & Johnson Report, Microsoft (MSFT) - Get Microsoft Corporation Report and PepsiCo (PEP) - Get PepsiCo, Inc. Report. Cramer suggested selling Cisco and adding an industrial stock like Honeywell (HON) - Get Honeywell International Inc. Report.
The second portfolio's top holdings included MPLX (MPLX) - Get MPLX LP Report, RingCentral (RNG) - Get RingCentral, Inc. Class A Report, Ventas (VTR) - Get Ventas, Inc. Report, Walt Disney Co. (DIS) - Get Walt Disney Company Report and Apple (AAPL) - Get Apple Inc. Report. Cramer said he's not a fan of MPLX, but he was bullish on the rest of the portfolio, saying it was properly diversified.
The third portfolio had BP (BP ADR) , British American Tobacco (BTI) - Get British American Tobacco plc Report, GlaxoSmithKline (GSK) - Get GlaxoSmithKline Plc Report, National Grid (NGG) - Get National Grid Plc Report and Rio Tinto (RIO) - Get Rio Tinto Plc Report as its top five stocks. Cramer also blessed this portfolio as diversified.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in VIAC, AMZN, CSCO, MSFT, PEP, HON, DIS, AAPL, BP.