Stock splits create no value whatsoever, Jim Cramer reminded his Mad Money viewers Wednesday. But they're also exactly what this market needs to keep vaulting higher.
Cramer explained that in years past, when individual investors were plentiful, companies routinely split their stocks. Back then, it was a sign of health and momentum. The magic number was $100 a share and when your stock crossed it, that was the time to announce a split.
After the dot-com collapse and the financial crisis, many individual investors were scared into index and mutual funds. That made stock splits less common. CEOs instead catered to the needs of institutional investors, caring less about individual traders.
But now there's a whole new class of investors reentering the market, spurred on by online platforms like Robinhood. These traders aren't looking for value, they're looking for stocks they can afford to buy. That's why the news of Apple's (AAPL) - Get Report and Tesla's (TSLA) - Get Report stock splits matter so much. Now these new investors can own quality companies instead of risky penny stocks.
Cramer said CEOs should step up and take notice of the 13% pop in shares of Tesla today. He said Amazon (AMZN) - Get Report, Alphabet (GOOGL) - Get Report and Chipotle Mexican Grill (CMG) - Get Report, along with Netflix (NFLX) - Get Report, Costco (COST) - Get Report and Home Depot (HD) - Get Report should all consider following in the footsteps of Tim Cook and Elon Musk.
Logically, stock splits shouldn't matter, Cramer concluded, but in the real world, and to a new class of investors, they matter a great deal.
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Off the Charts: Buying Opportunity?
In the "Off The Charts" segment, Cramer checked in with colleague Carley Garner over the direction of the markets and whether we can continue vaulting to new highs.
Garner first consulted the Commitment of Traders, or COT, report, to see what the large institutional investors were up to. She noted this group is extremely bearish on stocks, meaning a coming short squeeze is likely. The relative strength indicator and the Williams Oscillator are also overbought, which combined with a seasonally weak month for stocks, means a pullback is likely.
Longer-term, however, Garner remained bullish, noting the S&P 500 has a ceiling at 3,400 and has been spending the past few weeks filling the gap towards that ceiling.
Cramer agreed with Garner, calling any short-term weakness a buying opportunity.
Executive Decision: Cisco Systems
In his first "Executive Decision" segment, Cramer checked in with Chuck Robbins, president and CEO of Cisco Systems (CSCO) - Get Report, the networking giant that just posted strong earnings, but with weaker forecasts that sent shares down 6.4% after the close.
Robbins commented on several issues surrounding Cisco's results. He said the departure of long-time CFO Kelly Kramer may have been a shock for some, but Kramer has already outlasted the average tenure of a corporate CFO. Robbins noted that Kramer will stay with Cisco until her replacement has been found.
Turning to the topic of their business, Robbins said there is still a lot of uncertainty in the enterprise market. Companies are not sure exactly how the virus and vaccines will play out or exactly when their employees will be returning to the office. There is also uncertainty surrounding government stimulus and the coming November elections, all of which have led Cisco to offer conservative guidance.
When asked about Webex, Cisco's video conferencing platform, Robbins said Webex is growing double digits during the pandemic, but still represents a small portion of Cisco's overall business.
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Executive Decision: Emergent BioSolutions
For his second "Executive Decision" segment, Cramer also spoke with Robert Kramer, president and CEO of Emergent BioSolutions (EBS) - Get Report, the vaccine and therapeutics maker working hard to fight COVID-19. Shares of Emergent are up 37.5% over just the past month.
Kramer said Emergent is proud to do everything they can to help with the COVID-19 pandemic. He remained "cautious optimistic" with the vaccine progress that's been made so far, but noted that with six major players all with candidates in development, "it will be only a matter of time" before we have a successful treatment available.
When asked about their role in vaccine development, Kramer pointed out that Emergent has partnered with companies like Novavax (NVAX) - Get Report to provide development support for their vaccine, among others. Emergent is also the U.S. supply chain partner for Johnson & Johnson's (JNJ) - Get Report vaccine candidate and will provide the manufacturing muscle to help bring millions of doses to market.
Executive Decision: J2 Global
Shah explained that while this quarter was brutal for the publishing industry overall, the growth and strength of J2 has been remarkable. He said J2 isn't focused on driving impressions, they're focused on their customers' goals. And with so many different verticals, from technology to gaming and healthcare, advertisers are increasingly preferring the quality of their portfolio.
Shah said the interest in health content has been particularly strong, and not just for COVID-19 information. He said overall, people are searching for physical and mental wellness content and J2's properties have the information they seek.
Finally, Shah said they feel J2 shares represent a great value, which is why they continue to buy back their shares.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Wednesday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, AMZN, GOOGL, COST, JNJ.