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There's something brewing in the stock market, Jim Cramer told his Mad Money viewers Monday. After pouring over hundreds of stack charts over the weekend, Cramer said he's identified not one but six sectors that can be bought right here and bought aggressively on any Federal Reserve-induced weakness later in the week.
First up: the utilities, a group that acts like a bond only with growth. Cramer said American Electric Power (AEP) - Get Report , a stock he owns for his charitable trust, Action Alerts PLUS, and ConEd (ED) - Get Report have caught his eye. Next are the auto repair stocks including O'Reilly Automotive (ORA) - Get Report and AutoZone (AZO) - Get Report , a perennial Cramer fave.
Surprisingly, the steel stocks have made the list after a new tariff on foreign steel imports took hold this month. AK Steel (AKS) - Get Report and U.S. Steel (X) - Get Report have both run hard, but Cramer still likes Nucor (NUE) - Get Report , which is up 12% for the year.
Rounding out the list are the food stocks including Kellogg (K) - Get Report and Tyson Foods (TSN) - Get Report along with beverage maker Pepsico (PEP) - Get Report , another Action Alerts PLUS name. Finally, Cramer said anything that goes into a home, but not the home itself, is worth buying. He recommends Briggs & Stratton (BGG) - Get Report or Newell-Rubbermaid (NWL) - Get Report , which is in the process of being acquired.
Off the Charts
In his "Off the Charts" segment, Cramer looked at the big four tobacco stocks with colleague and Real Money contributor Suz Smith.
Smith first looked at a daily chart of Vector Group (VGR) - Get Report , which is involved in both tobacco and real estate with some e-cigarette exposure. She noted the stock just broke out above its 50-day moving average and is forming a bullish flag formation, characterized by a sharp upwards move followed by sideways trading. Smith offered up a price target of $25 a share. Cramer was also bullish, calling Vector a solid buy with a 7% yield.
Smith then looked at the daily chart of Phillip Morris International (PM) - Get Report , the world's leading cigarette maker with six of the top 15 global brands. After a four-month consolidation, shares of Phillip Morris are also beginning what could be a flag formation, with both the relative strength indication and the MACD momentum indicate confirming the move. Smith felt any pullback to the stock's 20-day moving average would be a buying opportunity. Cramer said with so many foreigners continuing to take up smoking, Phillip Morris is also a buy with its 4.2% yield.
The bullish sentiment continued when Smith looked at Altria (MO) - Get Report , the former domestic arm of the old Phillip Morris. Altria maintains most of the same solid brands as its international counterpart and is a chartist's dream, according to Smith. The stock have been in an uptrend since November, and buying near the bottom of that channel has always been a great entry point. The stochastics are signaling the stock is in overbought territory, but Smith noted that's been the case for six weeks, indicating strong demand . Cramer said with advertising for cigarettes limited in the U.S., Altria will likely stay number one for quite some time to come.
Finally, Smith looked a Reynolds American (RAI) , makers of Camel, Newport and Kool, among others. This chart Smith didn't like and she urged caution. She noted the RSI, MACD, and stochastics were all bearish and the stock is building the bearish head-and-shoulders formation. After running up from $46 to $52, she felt this stock, at best, is due for a rest.
Hewlett Packard Enterprise Is a Winner
When companies break themselves into pieces, it often unlocks a ton of value. That was the conclusion of a recent report that looked at the 38 spinoffs of 2015. Among the biggest breakups was Hewlett Packard Enterprise (HPE) - Get Report , which was spun off from Hewlett-Packardin October.
After the spinoff, the analysts were largely unimpressed with HP Enterprise. While they liked the company's valuation, just six times 2017 estimates, they felt the company had no catalyst to jumpstart growth.
But the company didn't disappoint, announcing a partnership with Microsoft (MSFT) - Get Report that allows it to deliver a suite of end-to-end tech services including servers, storage, software, consulting and more.
When HPE last reported it delivered a 1-cent-a-share earnings beat and was able to reiterate its full-year guidance. Even with shares now trading at eight times earnings, Cramer said this stock is a steal given its Microsoft alliance and continuing restructuring efforts.
Executive Decision: Tom Quinlan
Quinlan said that despite his company's organic growth slipping by 2% last quarter, the company still performed better than the economy at large, and the best is yet to come.
Quinlan continued by detailing the three entities that will be spun off during the breakup. The first will be a leading financial solutions company, helping companies deliver required filings and materials in the cloud. The second, LSC Communications, will include both print and office products. LSC will be a $3.5 billion business and offer a dividend.
Finally, there will be the remaining R.R. Donnelley company, which will continue servicing the Fortune 1000 companies with publishing and media communications services.
Cramer said not many stocks give you three companies in one, but R.R. Donnelley does.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer answered the question, are the airline stocks too cheap? "You bet," he concluded.
After speaking to Southwest Airlines (LUV) - Get Report CEO and industry veteran Gary Kelly earlier Monday, Cramer said things are indeed looking better than ever for the airlines. Total miles traveled may be down a bit in 2016, but that is more than offset by falling fuel prices.
Despite the many things pulling in the airlines' favor, the group overall still trades at just six times earnings, compared to the market average of 17 times earnings.
Cramer said valuations that low are simply "insane."
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At the time of publication, Cramer's Action Alerts PLUS had no position in stocks mentioned.