Supply and Demand: Jim Cramer's 'Mad Money' Recap

Jim Cramer says hedge funds aren't in control of the markets, nor are individual investors. Index funds rule the day.
Author:
Updated:
Original:

Sometimes, truth is stranger than fiction, Jim Cramer told his Mad Money viewers Tuesday. On Monday, Apple  (AAPL) - Get Report warned that the Covid-19 coronavirus outbreak in China and factory disruptions will impact its supply chain. Today, shares dipped just 1.8%. 

Cramer said the markets should have been down big on this news. If the coronavirus can disrupt the world's largest company, who knows how many other companies will also be affected or for how long? Even if China is able to jump start its manufacturing, demand inside of the world's largest market will be weak for quite some time. 

So why then did Apple's shares barely budge and other tech names like Amazon  (AMZN) - Get Report, Facebook  (FB) - Get Report and Tesla  (TSLA) - Get Report all end strong? In a word, index funds. 

Cramer said 60% of all new money entering the markets comes through index funds and index funds buy everything no matter what. Hedge funds aren't in control of the markets, neither are individual investors. Index funds and the laws of supply and demand rule the day.

That's how Apple can warn with no ill effects to the tech stock. Investors swooped in to buy the dip and the index funds weren't far behind. The only stocks that ended the day lower were the banks, because of falling interest rates, and Emerson Electric  (EMR) - Get Report, due to a downgrade as investors continue to flee the industrials.

Cramer and the AAP team are looking at everything from earnings and tariffs to the Federal Reserve. 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: LivePerson

For his "Executive Decision" segment, Cramer spoke with Rob LoCascio, founder, chairman and CEO of LivePerson  (LPSN) - Get Report, the conversational commerce company that saw its shares plunge 25.3% over the past week on what was widely perceived as a disappointing forecast. 

LoCascio explained that LivePerson grew 20% in the most recent quarter and they forecast 20% to 22% growth in 2020. He said what investors didn't like was the company's announcement that they will continue to spend on innovation. But, he added, they continue to grow organically and innovating is how that trend continues.

LoCascio said that in areas like healthcare, companies know that the more conversations they have, the closer to their patients they will be. That's why products like their newest LiveIntent offering, as so vital to help people converse in natural language and find the answers they need fast.  

When asked about their CFO stepping down, another possible sore spot for investors, LoCascio explained that he wanted to update that role in a game-changing way. That's why he hired a leader in the AI space to help continue to their journey in new directions.

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.

The Cost of the Coronavirus

Cramer said we should be aware of the impact of the coronavirus, particularly on those who become ill or die. And while he doesn't want to be a profiteer, Cramer said, he does want to help people who believe that there are companies that are in a position to gain. 

Clorox  (CLX) - Get Report is perhaps the biggest winner in this situation. Covid-19 can linger on surfaces for days, possibly, and bleach is an effective disinfectant. While Clorox is struggling in some areas, like bags and charcoal, Cramer said the company's restructuring is beginning to yield cost savings.

Other winners include Zoom Video  (ZM) - Get Report, the video conferencing platform that allows workers to stay in contact from home. Cramer also highlighted Teladoc Health  (TDOC) - Get Report, which appeared recently on the show, as another stay-at-home stock.

Finally, for investors hoping for a treatment for Covid-19, Cramer said the anti-viral drugs at Gilead Sciences  (GILD) - Get Report are worth keeping an eye on. But, he added, hope is not an investing strategy. 

Executive Decision: Cloudflare

In his second "Executive Decision" segment, Cramer sat down with Matthew Prince, chairman and CEO of Cloudflare  (NET) - Get Report, the cloud services company with shares up just 4% over the past three months. 

Prince explained that Cloudflare helps solve some the fundamental problems of being online. The company has 2.6 million customers and over 26 million different web properties on its network that spans 200 cities around the globe. 

One of the services Cloudflare provides is online security. The company stops attacks every day and helps keep companies secure by offering alternatives to services like VPNs. Cloud Flare currently has 550 customers paying over $100,000 per year for their services. 

When asked about their growth prospects, Prince noted that companies are still looking to replace people and physical servers with low-cost, secure alternatives that can scale globally. 

Cramer said Cloudflare remains a good story, especially in a market where investors say everything is overpriced.

Endeavor: One to Watch

For his final interview, Cramer sat down with Ariel Emanuel, CEO of Endeavor, the media company and talent agency that postponed its IPO after last year's WeWork implosion that crippled the IPO market. 

Emanuel said that when Endeavor first started, about 80% of their revenue came from representing people in the sports and entertainment worlds. Today, however, Endeavor is flexible, and also owns programming like UFC fighting, bull riding and other properties. He said television is a good place to be, and there are billion of dollars in new revenue flowing into the TV space. 

As for their delayed IPO, Emanuel said that Endeavor enjoys double-digit revenue growth and didn't need to come public. So after the WeWork IPO went south, they thought it best to postpone their offering. Endeavor is doing well, Emanuel said, and when they decide to come public, it will be a great deal for everyone.

Lightning Round

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: 

DuPont  (DD) - Get Report: "They have a new CEO that intends to deliver." 

Chemours  (CC) - Get Report: "I'm gonna take a pass there." 

LM Ericsson  (ERIC) - Get Report: "These companies are being crushed by Huawei." 

Leidos  (LDOS) - Get Report: "This one is not done going higher, even though it's had a big move." 

Sony  (SNE) - Get Report: "Sony is going lower, but I'm sticking by it." 

Cherry Hill Mortgage Investment  (CHMI) - Get Report: "This is a black box and we don't know what they own."

Introducing TheStreet Courses: Financial titans Jim Cramer and Robert Powell are bringing their market savvy and investing strategies to you. Learn how to create tax-efficient income, avoid top mistakes, reduce risk and more. With our courses, you will have the tools and knowledge needed to achieve your financial goals. Learn more about TheStreet Courses on investing and personal finance here.

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here.

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL, AMZN, FB, CLX.