The coronavirus pandemic has created a lot of so-called "new normals" in our economy. But Jim Cramer told his Mad Money viewers Tuesday that not all of them are sustainable. Once vaccines begin to usher in a bit of the "old normal," some stocks will begin to fizzle. Others will have staying power.
"You can't paint with too big of a brush," Cramer cautioned. Some stocks, like DocuSign (DOCU) - Get Report, are a vast improvement over signing documents in person or waiting for them in the mail. That's why the rally in DocuSign is sustainable. The same applies to PayPal (PYPL) - Get Report, which has become the de facto payment platform of the online age.
The same does not apply for the rally in rival payment platform Square (SQ) - Get Report. Cramer said Square is good, but not great, and can easily be copied. He was also bearish on Peloton (PTON) - Get Report in an era when people start heading back to the gym, as well as on Kimberly-Clark (KMB) - Get Report and Coca-Cola Co. (KO) - Get Report, two stocks that he said will be among the first to sell off once investors return to growth stocks.
Even in the race for a vaccine there are winners and losers, Cramer said. Pfizer's (PFE) - Get Report shares have fallen 10% since the company's vaccine began shipping because vaccines are a tiny part of what Pfizer does. Rival Moderna's (MRNA) - Get Report shares have rallied, but Cramer said once Johnson & Johnson's (JNJ) - Get Report vaccine is approved, Moderna will likely suffer a hit to its share price.
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When the Party Ends...
On Wall Street, dreams have a limited shelf life, Cramer cautioned viewers. Back in 2018, the cannabis stocks were all the rages as investors anticipated legalization in Canada. The move was bolstered when Constellation Brands (STZ) - Get Report took a stake in Canopy Growth (CGC) - Get Report, one of Canada's largest cannabis growers.
But anyone who's seen the chart of Tilray (TLRY) - Get Report knows how this story ends. Reality was far less exciting than the hype and investors abandoned the group en masse. That's because while investors get excited over total addressable markets, eventually they will want revenue and earnings.
We can see the same story playing out today in three different sectors, Cramer warned. First are the electric vehicle stocks, where everyone is coming public in the hopes of becoming the next Tesla (TSLA) - Get Report. The only problem? Most of these special purpose acquisition mergers are years away from even producing a product.
Cramer said there's equal hype in the sports betting space, with stocks like Penn National Gaming (PENN) - Get Report and Draft Kings (DKNG) - Get Report taking an early lead in what certainly will become a competitive space. Lastly, Cramer cautioned against the CRISPR stocks hoping that human genome editing will usher in the cure for cancer and other ailments. Genomics is indeed a hot science, he said, but it's also incredibly risky.
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High Yields and Red Flags
Investors chasing big dividend yields be warned, sometimes high yields are a red flag. Cramer said yields over 8% usually mean a dividend needs to be cut or share prices are heading lower. Either way, that big yield won't protect you from big losses. Fortunately, there are stocks with safe dividend yields.
Cramer recommended stocks like Dow Chemical (DOW) - Get Report with a 5% yield, IBM (IBM) - Get Report with a 5.1% yield and drugmaker AbbVie (ABBV) - Get Report, with a 4.9% yield, as safe dividend stocks for your portfolio. He also suggested B&G Foods (BGS) - Get Report, a long-time favorite that now sports a 7.1% dividend that Cramer said is totally safe.
Those looking for an oil play can consider Chevron (CVX) - Get Report, because under a Biden presidency, less drilling is a good thing for the oil producers. Cramer also recommended Kinder Morgan KMI.
Rounding out the list was Verizon (VZ) - Get Report, the telco with a safer yield than rival AT&T (T) - Get Report. He also suggested American Electric Power (AEP) - Get Report, Dominion Energy (D) - Get Report and Entergy (ETR) - Get Report for those looking for safe utilities with great dividends.
Executive Decision: Planet Fitness
In his "Executive Decision" segment, Cramer spoke with Chris Rondeau, CEO of Planet Fitness (PLNT) - Get Report, the fitness chain with shares that are up 12% over the past two months as people begin returning to their workout routines.
Rondeau said it's still early in the recovery but it's important that people get back to their fitness routines and that's what they're starting to do. Planet Fitness lost nearly one million members at the onset of the pandemic, but since then, the decline has slowed and other than members wearing masks, Rondeau said, "it's starting to feel like normal."
When asked how Planet Fitness could have a valuation of $6.4 billion while home fitness sensation Peloton is valued at $43 billion, Rondeau said that while Peloton is all the rage at the moment, he's betting on Planet Fitness. He said they've been in business for 28 years and nearly 40% of their members have never belonged to a fitness club before. Many of Planet Fitness locations are in low income neighborhoods, he added, which makes them sticky no matter how the economy is doing.
Common Sense Is the Answer
In his No-Huddle Offense segment, Cramer said we don't need to shut our economy down again in order to stop this virus, we just need to apply what we already know.
If we want to avoid more lockdowns, Cramer said we need masks, social distancing and better indoor ventilation. We also need cheap, at-home testing and accessible therapeutics for when people get sick.
This is not rocket science, Cramer concluded, it's just common sense.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Tuesday evening:
Tattooed Chef TTCF: "I looked into this one and it's not too bad. I like it."
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At the time of publication, Cramer's Action Alerts PLUS had a position in ABBV.