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When the Federal Reserve speaks, the big investors listen, Jim Cramer told his Mad Money viewers Monday. Now that the possibility of not one but two interest rate hikes may be on the table for later this year, the big money managers are springing into action.
"The that led us higher in the past are no longer in charge," Cramer explained. Big money managers are moving money into the sectors that prosper from economic growth. Sectors like the banks profit from a growing economy and higher net interest margins. Cramer said a growing economy is also great news for global industrials, such as Eaton (ETN) - Get Eaton Corp. Plc Report and Honeywell (HON) - Get Honeywell International Inc. (HON) Report and railroads like CSX (CSX) - Get CSX Corporation Report .
Other hot sectors will now be paper and chemicals, along with tech stocks like Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report and Cisco Systems (CSCO) - Get Cisco Systems, Inc. Report . Cramer is also bullish on chipmakers including NXP Semiconductor (NXPI) - Get NXP Semiconductors NV Report and others that may become the takeover targets.
What's good for the economy is also good for oil, Cramer added, which is why the oil patch has seen recent strength. It's even good for retailers, at least the higher-end names that consumers typically trade up to. That's why L Brands (LB) - Get L Brands, Inc. (LB) Report is up and the dollar stores are sinking.
Cramer said the only sector he can't recommend are the drugs, a group which is coming under increasing political and congressional fire.
Running Like a Deere
"The next time Wall Street gives up on John Deere (DE) - Get Deere & Company Report , please, please, please remember how management head-faked the analysts" this quarter, Cramer told viewers. Deere's earnings a week ago were so surprising that it makes you wonder how just about everyone missed it.
Before this quarter, shares of Deere were essentially flat for the year. The company delivered a modest top and bottom beat with it last reported in May, but it also lowered forecasts and tempered expectations. Investors took the company at its word.
But shortly after those earnings in May, Deere received an upgrade from a forward-thinking Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report , which noted that the time to buy agriculture stocks is when they're at their absolute worst. It turns out, equipment sales were at 30-year lows.
But other than Goldman, no one saw last week's 61-cents-a-share earnings blowout coming. Not only were the earnings terrific, the company's commentary painted a rosy picture for the rest of 2016.
Better still, sales were still sluggish at Deere, and the company delivered on those earnings just by cutting costs and executing perfectly. That means as demand picks up, investors can only expect earnings power to be multiplied.
Dollar General Is No Bargain
Cramer said once again the analysts got it wrong and didn't see the weakness in Dollar General and its rival Dollar Tree (DLTR) - Get Dollar Tree, Inc. Report , coming. What went wrong this quarter? Plenty.
First, Dollar General saw increased price competition from a reinvigorated Walmart (WMT) - Get Walmart Inc. Report . Next, it struggled with price deflation on several of its food items. Third, sales were weaker thanks to changes in federal food stamps that caused 500,000 people to lose eligibility. Finally, as the economy improves, those that can afford to shop elsewhere do.
Cramer said if Dollar General were fighting any one of these issues individually, it could be quantified and priced into its shares. But fighting a multi-front war makes it impossible to value, which means investors need to steer clear until the chaos is over.
Executive Decision: Robert Martin
For his "Executive Decision" segment, Cramer sat down with Robert Martin, president and CEO of Thor Industries (THO) - Get Thor Industries, Inc. Report , the luxury RV maker with shares that are up 45% for 2016, trading near all-time highs.
Martin said Airstream remains one of Thor's most iconic brands and production of the identifiable silver trailers continues at record levels and is only becoming more appealing to younger buyers.
When asked about aging demographics, Martin noted there are still five years of Baby Boomers ahead, but Thor continues to gain strength among Millennials as well. It's all about family and the outdoors and getting away, Martin said. Those values span generations.
Turning to his company's structure, Martin noted Thor is a collection of decentralized brands that all compete among themselves. Innovation drives the industry, he added, which is why this model works for Thor. Also helping sales are economic trends including improving employment and increased lending.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer reminded viewers that after an epic run higher, investors should always be prudent and trim their positions. But in the case of medical device maker Zimmer Biomet (ZBH) - Get Zimmer Biomet Holdings, Inc. (ZBH) Report , it's also prudent to let some of those gains keep on running.
Cramer said Zimmer is largely still a play on the company's acquisition of Biomet, which was delayed by almost a year thanks to a lengthy FDA approval process. That means that many of the synergies investors had expected for 2015 and only now beginning to hit the balance sheet for Zimmer for 2016.
But there's also more to like at Zimmer thanks to a two-year suspension of medical device taxes, he added. This only strengthens the cross-selling opportunities between Zimmer's and Biomet's product portfolios.
Shares of Zimmer are up 15% for the year, but that's largely still where the company was trading this time last year. Trading at just 14.8 times earnings, Cramer said shares could rise by 20% to 30% and still be cheaper than rival Stryker (SYK) - Get Stryker Corporation Report , which trades near 18 times earnings.
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At the time of publication, Cramer's Action Alerts PLUS had a position in NXPI.