The stock market doesn't always act the way you'd expect, Jim Cramer told his Mad Money viewers Thursday. Today's market hinged on NABAF, Cramer's new acronym for "not as bad as feared."
Consider Union Pacific (UNP) - Get Report , the railroad which saw revenues fall 7% this past quarter. Inventors originally sent shares lower on the news, but after listening to the company's conference call, they soon realized that Union Pacific cut costs and reduced their headcount, making the shortfall not as bad as fears. A similar story played out at rival CSX (CSX) - Get Report yesterday, as the company cut costs in anticipation of the weakness.
The "not as bad as expected" theme played out at United Rentals (URI) - Get Report and also at Honeywell (HON) - Get Report , where even the aerospace weakness from Boeing (BA) - Get Report was no match for management's excellent execution. Cramer said both of these stocks are not done going higher.
Meanwhile, in healthcare, UnitedHealth Group (UNH) - Get Report tacked on another 2.8%, continuing its march higher after investors realized their fears about Elizabeth Warren may be not as bad as they expected.
Cramer said the only company not delivering a better than feared quarter was IBM (IBM) - Get Report , where even the addition of Red Hat was not enough to stem the company's losses from legacy businesses.
Cramer and the AAP team have more on this week's earnings. 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.
Optimism for Trade Deals
What happens if Larry Kudlow, President Trump's chief economic adviser, is right about trade? Kudlow told Cramer on CNBC's "Squawk Box" earlier Thursday that people are too negative on a trade deal with China. According to Kudlow, things like the 49% cap on U.S. ownership of joint ventures may soon be a thing of the past.
Kudlow was also bullish on the completion of a trade deal with Canada and Mexico to replace NAFTA. He felt that deal could be finalized as early as Thanksgiving.
Cramer said if Kudlow is right, and we see a deal by Thanksgiving -- and progress on China shortly thereafter, the markets could surge higher. Earnings will explode for the beaten down industrials, he said, and long-term interest rates will rise. Stocks haven't priced in any of this good news, Cramer concluded, which is why investors can't afford to be too negative.
Not so Fast on Netflix
While some analysts have proclaimed that Netflix has fixed its problems and is back on track, Cramer said his reading of the earnings shows continued softness. Netflix did beat on earnings, he said, but the important metric -- subscriber growth -- was only strong overseas and was mixed at best domestically.
But we don't live in a vacuum, and the reality is that this is the last quarter Netflix will be reporting without competition from Apple (AAPL) - Get Report and Walt Disney (DIS) - Get Report . Given the lackluster growth without this competition, Cramer said he's not inspired the company will fare better once that competition arrives in just a few weeks' time.
Shares of Netflix have already fallen from $385 a share earlier this year to $252 when then bottomed last month. Cramer said the company remains in the penalty box for at least one more quarter. He told viewers to use today's bounce to sell as Netflix is simply too risky to own.
Executive Decision: Arrowhead Pharmaceuticals
For his "Executive Decision" segment, Cramer spoke with Christopher Anzalone, president and CEO of Arrowhead Pharmaceuticals (ARWR) - Get Report , the development-stage biotech focusing on gene therapy. The company holds an analyst day Friday in New York City.
Anzalone explained that Arrowhead is pioneering gene therapies developed around the concept of RNA interference, which acts to silence, or turn off, certain genes that are known to cause disease. The company originally focused on just the liver, but is now broadening its scope outside of the liver and is also developing technologies to silence multiple genes at the same time.
Arrowhead currently has big name partnerships with Johnson & Johnson (JNJ) - Get Report and Amgen (AMGN) - Get Report to help them develop and commercialize various drugs based off of the company's technology. Arrowhead recently announced a successful trial for cystic fibrosis, for example, that included 110 patients and had no serious adverse events.
Shares of Arrowhead are up 171% over the past year and Cramer continued his recommendation.
On Real Money, Cramer keys in on the companies and CEOs he knows best. Get more of his insights with a free trial subscription to Real Money.
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.
Cramer said he was bullish on this properly-diversified portfolio.
The second portfolio's top holdings included Nvidia (NVDA) - Get Report , Marvell Technologies (MRVL) - Get Report , Amazon (AMZN) - Get Report , JPMorgan Chase (JPM) - Get Report and Abbott Labs (ABT) - Get Report .
Cramer was also bullish on this portfolio, even with Nvidia and Marvell both being semiconductor makers.
Cramer said he'd sell McDonald's and add an industrial stock like Honeywell to be properly diversified.
Cramer suggested swapping Sirius for a drug stock, like Abbott Labs.
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At the time of publication, Cramer's Action Alerts PLUS had a position in HON, UNH, AAPL, DIS, JNJ, CVS, NVDA, MRVL, AMZN, JPM, ABT, CMCSA.