Monday's market rally was based on hope and hype, not facts, Jim Cramer told his Mad Money viewers Monday. Cramer reminded viewers that when everyone agrees with you, that's the time to sell, not a time to give in and chase stocks higher.
Monday was another day and another rally based on nothing, but it wasn't all bad. There are only three reasons why stocks go higher, Cramer said. The first is better-than-expected earnings. The second is a company helping itself through things like mergers. The third, and the most dangerous, is multiple expansion, or hype, when investors are simply willing to pay more for existing earnings. Unfortunately, multiple expansion is a lot of what we saw Monday.
Cramer said Apple (AAPL) - Get Report shares rose 6.3% today, ahead of the company's iPhone launch event tomorrow. There's nothing new about Apple's event, they have one every year. But this year, the analysts are clamoring about a "super cycle" that will drive earnings for years to come. Cramer reiterated that Apple should be bought, not traded.
Amazon (AMZN) - Get Report shares also rallied hard Monday, ending up 4.7% ahead of the company's Prime Day, which begins tomorrow. Again, Cramer noted that analysts are overly bullish on Amazon, which hasn't reported anything regarding their earnings.
Next, there's Alphabet (GOOGL) - Get Report and Facebook (FB) - Get Report, two more tech giants that are seeing their shares rise on no news. Cramer noted that the controversy has died down surrounding Facebook now that the company is a major force helping small businesses, but that scrutiny is sure to return. He said Alphabet would be worth more if it were forced to break itself up.
Even Twitter (TWTR) - Get Report received an upgrade today, as did PepsiCo (PEP) - Get Report. Cramer said he's liked both of these stocks for a long time, but sees no reason they should be rallying at this moment.
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Outlook for Ford, GE
There's a race between Ford (F) - Get Report and General Electric (GE) - Get Report to get to $10 a share and Cramer's picking his favorite. He said both of these beleaguered stocks are loved by younger investors for their low share prices, and $10 is a pivotal level, as it's the minimum price most hedge funds will consider buying. Shares that cross $10, Cramer said, are likely to see their rallies continue.
Cramer said that after successfully navigating the 2008 financial crisis, Ford made a number of missteps. The company focused too heavily on cars after the market had shifted to larger SUVs and its international business was a mess. The chaos that ensued saw a rotating cast of CEOs that struggled to turn the ship around.
General Electric was another company that saw a spectacular fall from grace. GE made a series of ill-timed acquisitions and its opaque accounting hid losses from its long-term care division.
But now, both autos and aerospace are on the mend, causing both stocks to rise. Cramer said he's betting on Ford. He said the auto market is recovering now, while aerospace may still be a year from turning itself around given the pandemic.
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Not all Retail Is Equal
Not all of retail is created equal, Cramer told viewers. Many of the mall-based retailers have been left for dead, but there are three outliers that have been lagging their peers, but are now playing catch up. The laggards are L Brands (LB) - Get Report, American Eagle Outfitters (AEO) - Get Report and Gap (GPS) - Get Report, and Cramer said all three can be bought.
L Brands has been struggling for years, but after a failed attempt to sell Victoria's Secret, the company has put forth a cost-cutting plan and is seeing strength in its Bath and Body Works stores. Cramer said it makes sense that Bath and Body would be in demand as people are spending a lot more time at home.
American Eagle has been another retail laggard, but the company caught fire with its Aerie lifestyle brand that focuses on intimate and activewear. Cramer said with people stuck at home, there's less demand for business casual, but a lot more demand for comfortable apparel.
Finally, there's Gap, whose Athleta stores are succeeding on the heels of Lululemon Athletica (LULU) - Get Report. Gap recently announced it's hiring 50,000 seasonal workers for the holiday season. Cramer said you don't hire tens of thousands of workers if things are going badly.
L Brands trades at 14 times earnings, American Eagle at 13 times and Gap at 18 times. Cramer said all three of these stocks are inexpensive.
Executive Decision: Sports Entertainment Acquisition
In his "Executive Decision" segment, Cramer spoke with Eric Grubman, chairman and CFO of Sports Entertainment Acquisition SEAH.U, the special purpose acquisition company that came public a week and a half ago.
Grubman explained that sports and entertainment are a big part of many people's lives. Yet until now, the industry has largely been fueled by private money and private equity money. His company will bring public capital to an industry valued at $149 billion.
When asked what this SPAC is looking to merge with, Grubman said that their scope is fairly broad, containing anything in the sports and entertainment world, including any enabling technology or service. He said they don't aim to be a technology company, however, and will instead focus on sports and entertainment names and brands that resonate with people.
Stocks That Can Grow Without Stimulus Money
In his "No-Huddle Offense" segment, Cramer told viewers to stop fretting over stimulus negotiations. Instead, start buying the agriculture stocks that don't rely on stimulus.
Cramer noted that Deere and Co. (DE) - Get Report received very bullish comments from analysts recently and that's great news for Deere and its rival AGCO (AGCO) - Get Report. He was also bullish on seed maker Corteva (CTVA) - Get Report and fertilizer maker Mosaic (MOS) - Get Report, both of which are amid a silent bull market.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Monday evening:
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At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, AMZN, GOOGL, FB.