The markets could sell off again on more bad news about the coronavirus, Jim Cramer warned his Mad Money viewers Thursday. But with corporate earnings coming in strong this quarter, any good news about the virus could also spark a strong rally.
Cramer explained that while stocks are signaling prosperity, there are worrisome signs that could point to a recession. One of those signs is the bond market, where the interest rate on the 10-year Treasury bond has fallen to 1.59%. Seasoned investors know to always pay attention to bonds.
The second worry is the possibility of a Chinese economic slowdown. China is the second-largest economy in the world and could not just export the coronavirus, it could also export a global recession. Right now, the weakness is contained to companies that do business in China, like Starbucks (SBUX) - Get Report, Nike (NIKE) and Apple (AAPL) - Get Report, along with cruise lines and hotels. But if the coronavirus spreads further, be prepared for malls, restaurants and retailers to also suffer.
Finally, Cramer said that commodities are also signaling the risk of a recession. He advised investors to steer clear of oil and oil-related stocks in particular.
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Battle of Big Pharma
There are a lot of things to like about AbbVie, Cramer said. The company is a leader in the treatment of migraines and the with the acquisition on Allergan (AGN) - Get Report, AbbVie will a number of other valuable franchises, including Botox. Shares of AbbVie currently trade for a steal, just nine times earnings.
Cramer was also a fan on Bristol Myers, which is also making the strategic acquisition of Celgene (CELG) - Get Report. Like AbbVie, the combination of Bristol and Celgene gives investors exciting new drug franchises and multiple ways to win. Bristol is also an inexpensive stock.
When forced to choose, Cramer said he'd invest with AbbVie, which has slightly higher growth, although he noted that both stocks would make an excellent addition to your portfolio.
Roadmap for Success
Companies that lose big money typically fail, Cramer told viewers, but Wall Street always has money available for those companies with the best products.
There are three things a company needs in order to be loved by Wall Street: a charismatic founder, the best product and solid execution. Over the past two decades, that company has been Amazon (AMZN) - Get Report, but today, that company is Tesla (TSLA) - Get Report.
Amazon was losing money for years, and the skeptics were positive the company would run out of money long before it ever turned a profit. But those money-losing years paid off as Amazon grew into a giant that could disrupt industry after industry.
The same is true with Tesla. The bears and short-sellers never believed CEO Elon Musk, but Musk had the best electric car on the market and ravenous customers. Over time, Tesla was able to fix its execution problems.
Executive Decision: Texas Capital Bancshares
For his "Executive Decision" segment, Cramer spoke with C. Keith Cargill, CEO of Texas Capital Bancshares (TCBI) - Get Report, and David Brooks, chairman and CEO of Independent Bank Group (IBTX) - Get Report, two regional banks that are in the process of merging.
Cargill said there's a tremendous opportunity for Texas Capital, which operates in Texas, and Independent Bank, which operates in Colorado, to come together as a merger of equals. He said while share prices have fallen since the announcement, they're excited to make it happen and prove the skeptics wrong.
Brooks admitted that it is harder to make money with interest rates at historic lows. That's why banks need scale and to have synergies to be able to compete and offer innovative services. The combined company will continue to be about relationship banking, he said, and being nimble enough to serve local communities
Cargill was also excited about Bask Bank, their innovative online bank that offers airline miles instead of interest. With so many savings accounts paying almost no interest, customers are excited to receive rewards they can actually use, he said.
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Where Companies Spend
In his "No-Huddle Offense" segment, Cramer said not all spending is good spending in the eyes of Wall Street. He said that investors cheered when snack maker Mondelez (MDLZ) - Get Report increased their spending and when Microsoft (MSFT) - Get Report announced a $1 billion fund for its environmental efforts. Shareholders also don't mind when Tesla spends money, because the company is building factories to meet demand and not frivolously spending on advertising.
But then UPS (UPS) - Get Report announced increased spending to speed up deliveries and keep Amazon happy, shares plunged 6.7%. Cramer said this spending was necessary and Wall Street is being shortsighted.
Facebook (FB) - Get Report is also spending in a way Wall Street isn't happy with, to comply with regulations. Cramer said the new expenses could constrain Facebook's earnings, but the company simply has no choice.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
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