Today started a market rotation, Jim Cramer told his Mad Money viewers Thursday. Money managers are selling the safety stocks and buying into the economically sensitive names that have gotten too cheap to ignore.
Case in point, today's trifecta of semiconductor earnings that included Texas Instruments (TXN) , Xilinx (XLNX) and LAM Research (LRCX) . Shares of Texas Instruments rose 3.7%, despite the company's cautionary words. Xilinx had a fantastic quarter, as many of its end businesses did well, including defense, AI and the red-hot 5G wireless. Meanwhile LAM Research posted a better-than-expected quarter and announced a $5 billion stock buyback that sent shares soaring 15.7%.
Cramer said he thinks the run in the semiconductors can continue, despite the earnings miss from Intel (INTC) . He endorsed picking up shares of Texas Instruments or LAM Research.
But not everything goes up in a rotation, Cramer warned. There's simply not enough new money coming into the market, which means all of this buying has to come from somewhere. Today, somewhere included spice maker McCormick (MKC) , which plunged 10.5% even after a solid quarter.
Executive Decision: United Rentals
For his "Executive Decision" segment, Cramer sat down with Michael Kneeland and Matthew Flannery, the outgoing and incoming CEO of United Rentals (URI) , which just posted a strong quarter that included a 27% rise in revenues.
Kneeland said that United Rentals continues to grow because the sharing economy continues to make renting equipment a far better option than owning it for more and more customers. That's part of the reason why United Rentals' customer base keeps diversifying.
Flannery added that United Rentals is also actively on the acquisition trail, making nine deals over the past 24 months. Despite all of those acquisitions, the company's leverage remains at the bottom of their range at just 2.5%. United Rentals continues to drive productivity by investing in technology, as it builds a true national rental platform.
When asked whether the government shutdown has affected their business, Kneeland said they haven't seen any effects yet but eventually it will begin to affect companies and consumers alike.
Cramer continued his recommendation of the company.Merck
Pay no attention to the day-to-day gyrations of the stock market, Cramer reminded viewers. It's the long-term trends that matter to individual investors, Cramer said, trends like what's been happening at Merck (MRK) , which is up 18% over the past 12 months, but still has a lot more room to run.
Investors have been excited by Keytruda, Merck's lung cancer treatment. Sales have been growing like a weed since its debut. But Cramer said there's a lot more to like at Merck, including it's low valuation of just 14 times earnings. That's far less than the 17 time earnings at rivals like Eli Lilly (LLY) .
Lilly's higher multiple stems from the company unlocking value by spinning off Elanco, it's animal health business. Cramer noted that Merck also has an animal health division and could follow in Lilly's footsteps. If it did, shares could rise from $70 to $93 a share, Cramer argued.
Cramer added that Merck also has a 3% dividend yield and a generous stock buyback program, which are two more reasons to like this pharma giant that has returned itself into a growth company.
Executive Decision: Okta
In his second "Executive Decision" segment, Cramer also spoke with Todd McKinnon, co-founder and CEO of Okta (OKTA) , the cybersecurity company that just celebrated its tenth anniversary and its 100 millionth registered user.
McKinnon explained that Okta sometimes helps its customers in the public-facing way, but most of the time remains behind the scenes, keeping infrastructure secure and helping to provide a better, more secure customer experience. Cloud adoption is still in its early days, he added, which is why they still see plenty of growth ahead.
When asked about one of their marquee customers, Adobe Systems (ADBE) , McKinnon said that Okta helps Adobe both by helping their customers connect to the Creative Cloud and their employees connect to company applications. He noted that Adobe is also a perfect example of a successful cloud computing company.
McKinnon added that part of Okta's customer-centric culture stems from its six years working at another successful cloud company, Salesforce.com (CRM) .
No Huddle Offense
In his "No Huddle Offense" segment, Cramer outlined some of the long-term themes that are still working, even in out less-than-ideal macroeconomic environment.
Biotech was Cramer's third macro theme. He said there are a number of winners in this space, including Merck and Eli Lilly. Digitization was his fourth theme. He said investors should be thinking about companies like VMWare (VMW) .
Among the sectors to avoid? Cramer said there's nothing good happening in autos or housing and he'd steer clear of both.
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