Everyone who sold technology stocks this earnings season is now likely having seller's remorse, Jim Cramer announced to his Mad Money viewers Monday. That's because the market has been having a lot of impulse control issues as of late, Cramer said, which is leading to some volatile trading.
It was just a few weeks ago when Apple (AAPL) pre-announced a slowdown in Chinese iPhone sales and shares traded as low as just 10 times earnings. But since the company reported earnings last week, investors presume the bottom is in and shares have been rallying.
Then there's Facebook (FB) , a company that has done a lot of shady things as of late, but since advertisers still love them, all seems to now be forgiven by investors.
The same applies to Microsoft (MSFT) , a stock which many shareholders bailed on, but now has gotten its groove back.
Investors also seem to have forgotten why they sold shares of Amazon (AMZN) last week, as that stock began to recover as well. Cramer said he's willing to bet that Alphabet (GOOGL) shares, which closed down 3.1% today, will also be rallying in just a few days time.
Cramer and the AAP team are focusing on earnings this week. 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: Clorox
For his "Executive Decision" segment, Cramer spoke with Benno Dorer, chairman and CEO of Clorox (CLX) , which just reported a 10-cents-a-share earnings beat that sent shares soaring 5.6%.
Dorer said Clorox continues to drive value for their shareholders and this quarter posted 4% organic sales growth, while also cutting costs. The company was also able to raise prices to help offset rising commodity costs, a move that helped boost their gross margins.
When asked about tariffs, Dorer noted that only 17% of Clorox's sales come from overseas, putting them in a unique position in the industry. They continue to invest in the U.S., where, he said, there remains a strong, stable consumer that is responding well to the innovations Clorox continues to deliver.
Dorer was excited about Hidden Valley Ranch, a brand that is no longer just for salads, he said. Hidden Valley dressing has now become a condiment, he noted, and is being used as a dip for a variety of items, including chicken wings.
Clorox also continues to invest in ecommerce, Dorer said, and online sales grew to 8% of total sales this quarter. They continue to invest in online and social media advertising.
The Executive Tree
In professional football, there's a concept known as the "coaching tree," Cramer told viewers, a philosophy that says that assistant coaches that learn from great head coaches go on to become great head coaches themselves. The same applies to public companies, where great CEOs can nurture an "executive tree" that can go on to do great things themselves.
Nowhere is that more evident than with Mark Benioff, chairman and former CEO of Salesforce.com (CRM) . Not only did Benioff help revolutionize enterprise software, but he's also left a terrific legacy of top-notch executives.
Tien Tzou, CEO at Zuora (ZUO) , served under Benioff and the company is now the leader in subscription management services and optimization. The company wrote the book on the growing subscription economy.
Peter Gassner, CEO at Veeva Systems (VEEV) , is the second branch of the Benioff executive tree, Cramer said. This company provides cloud software to the biotech and pharma industries and its growth over the past few years has been remarkable.
Then there's Todd McKinnon, who heads up Okta (OKTA) , a cybersecurity company helping to protect login credentials from hackers. And finally, George Hu, CEO at Twilio (TWLO) , is the last branch of the tree. Twilio is the messaging platform other cloud companies have come to depend on for mission-critical notifications.
All of these great companies grew out of Benioff's leadership, Cramer concluded, and every one of them should be considered for your portfolio.
What's Love Got to do With it?
"Never ever fall in love with a stock," Cramer reminded viewers. Eventually, that stock will fall out of favor and it will be time to sell. That time is now for Align Technologies (ALGN) , makers of Invisalign braces. After years of gains, the stock has now fallen 32% over the past six months.
What went wrong? Cramer said, simply -- competition. For years, Invisalign was the only game in town, he said, and patients loved the product. But now that some of the company's patents have expired, a new wave of competition has been unleashed and the results at Align are getting murky.
Cramer said he doesn't like where things are headed at Align. Management already noted a "promotional environment" on their conference call, which is always code for increased competition. Additionally, Align lowered their guidance from $1.19 a share to between 79 and 84 cents a share as a result. The competition, it seems, is formidable.
Trading at 35 times earnings, Cramer said the stock is too expensive to justify the risks.
Tech vs. Industrials
In his "No-Huddle Offense" segment, Cramer explored the curious case of the semiconductor equipment makers vs. the semiconductor material suppliers. He noted that this quarter, the suppliers, like DowDuPont (DWDP) , 3M (MMM) and Illinois Toolworks (ITW) all said semiconductors were weak. But semiconductor equipment maker Lam Research (LRCX) notably called a bottom in the group.
Who's right? Cramer said if Lam is wrong, then it would be far too dangerous to own these industrials that have big exposure to the semiconductor sector. But what if these suppliers are being too negative and Lam is correct? Then, he said, it's time to buy Honeywell (HON) , which not only has a great semiconductor materials division, but also has exposure to aerospace, which can offer some protection.
Over on Real Money, Cramer's diving into the paradox of weak industrials and strong tech. Get more of his insights with a free trial subscription to Real Money.
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