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It’s creating a “tug-of-war” in the stock market, he said, because companies continue to announce positive news despite the negative geopolitical issues in the Middle East.
Because the market hates uncertainty, it is prone to selloffs due to negative headlines. It could also sell off if crude oil prices spike higher or if the President comments on the situation. For this reason, Cramer is “happy to sit on the sidelines until we get a little more clarity.”
He suggested that investors consider taking profits on some of their big winners and wait for a larger pullback before buying as he detailed next week's game plan.
On Monday the May industrial production number will be released. Cramer says the result may be better than many investors expect, as autos, aerospace and oil and gas all did well in the past month.
Tuesday will see the May housing starts report. This is a sector that Cramer said he is nervous about and, judging by the lack of mortgage applications the bounce in homebuilder stocks is unlikely to come.
Wednesday is the “big day of next week,” Cramer said, with the Federal Reserve set to comment on the current state of the economy. He thinks the Fed should stop buying bonds and start selling them. Meanwhile, FedEx (FDX - Get Report) is scheduled to report earnings that same day. While Cramer doesn't care for the stock much at current levels, he said the conference call can be a valuable source for a read on the global economy.
Thursday is Rite-Aid (RAD - Get Report) and Kroger (KR - Get Report) reporting earnings. Investors who are not long Rite Aid should wait until after its earnings results before considering buying the stock. Kroger, he hopes, will provide a read on the natural and organic food market and perhaps even provide clues as to which supermarket company will be next to be taken over. He's also taking a "wait and see" attitude on Whole Foods Market (WFM).
Friday will see reports from CarMax Group (KMX - Get Report) and Darden Restaurants (DRI - Get Report). CarMax will provide investors with a read on the health of the auto market, while Cramer expects "fireworks" during its conference calls because activist investors want the heads of company management.
Can Priceline Be Outbid?
“It’s all about your phone,” Cramer said about the $2.6 billion bid that Priceline.com (PCLN) made for OpenTable (OPEN). The $103 per share bid represents a 46% premium to Thursday’s closing price of OpenTable shares.
Cramer praised both companies for their business models, which are “based on the convenience of modern-day technology.” He added that Priceline’s stock is cheap based on valuation, while its platform allows users to book hotel rooms and flights at the cheapest rates.
Now, with its potential acquisition of OpenTable, the company can broaden its business model to restaurant reservations, which will only enhance the convenience for its users.
OpenTable has plenty of runway left, too, Cramer reasoned, with only 15% of restaurant reservations being made online. OpenTable doesn’t just provide a huge benefit to users either but to its paying restaurant customers as well.
For each $1 in fees restaurants pay to OpenTable, they generate an average revenue of $43, he said. Since the share price of OpenTable actually finished higher than Priceline’s $103 per share offer, perhaps other companies are prospective buyers as well.
Cramer suggested Google (GOOGL - Get Report) or Yahoo! (YHOO) might be interested in buying OpenTable. Yelp (YELP - Get Report) is another company that may be a takeover target for the two companies with its recent launch of a restaurant reservation function.
The bottom line is this, Cramer said: The market is misjudging some companies’ valuations, not to investors but to other companies.
Theme Park Stocks for the Long Haul
As oil continues to move relentless higher, Cramer looked to an area you might not expect - amusement parks.
Both Disney (DIS - Get Report) and Cedar Fair (FUN - Get Report) are "great stocks to buy and put away for your kids," he said. However, they also tend to selloff when oil prices increase, as they could because of the current conflict in Iraq.
Disney hit a new all-time high on Monday of $85.86. Now it’s the second most heavily shorted stock in the Dow Jones Industrial Average and closed at $82.78 on Friday, he noted. Investors fear Disney’s theme park business will suffer as a result of higher prices at the pump. However, Cramer pointed out that this particular segment only makes up 21% of Disney’s operating income.
Cedar Fair, on the other hand, may actually see theme park traffic decline because of higher gasoline prices. That’s because its parks are more regionally located and the value-conscious consumer can drive there, Cramer reasoned.
However, should the stock sell off, it's a buying opportunity for one major reason: the dividend. Currently the stock yields 5.1% and the payout is expected to rise to $3.50 next year, giving it a yield of 6.7% if the share price remains unchanged.
Cramer said the yield should help cushion the fall of the stock price should it fall; if it does, shares become more attractive because "nothing is better than buying a higher-yielding stock into weakness.”
Back in his hedge fund days, Cramer said Microsoft (MSFT - Get Report) and Intel (INTC - Get Report) were two of the best stocks to buy. Sadly, however, Intel lost its luster. The company spent too much money on things that didn’t provide enough return, Cramer said. But CEO Brian Krzanich is changing that.
Krzanich is stopping Intel from spending money on ventures that do not provide enough return and he’s through with being runner-up behind Samsung (SSNLF) in terms of innovation, Cramer said.
The company pre-announced “sharply better-than-expected sales and earnings” on Thursday. Krzanich is “restoring the greatness of what was once the best of the best of all manufacturers,” Cramer added.
The better-than-expected results come on the heels of improved PC demand, which means the good news doesn’t stop with Intel. “You can buy Hewlett-Packard (HPQ - Get Report), Micron (MU - Get Report), Western Digital (WDC - Get Report), Seagate Technology (STX), even Microsoft,” Cramer said.
Investors can buy Intel at current levels due to its attractive valuation and 3% dividend yield. However, it’s an even more tempting buy if the stock gets knocked down by geopolitical events, Cramer reasoned.
“It’s terrific that Intel’s dry spell is over,” both for the technology sector and the overall market, Cramer concluded.
'Dr.' Cramer's in the House
As part of his Father’s Day program, “Doctor” Cramer sat down with families to help them settle their disputes over which stocks to buy, sell or avoid.
The first “patients” couldn’t come to a decision on whether to buy Sotheby’s (BID). Cramer reasoned, “I think it’s somewhat of a played-out story. I would avoid the stock right here.”
A father and son disagreed on whether to buy Twitter (TWTR - Get Report) or Facebook (FB - Get Report). Cramer said, “This is tough call. Twitter is full of promise and potential. But until management gets it together, I prefer Facebook.” Facebook is a holding in Cramer's charitable trust, Action Alerts PLUS.
Finally, there was a dispute on whether to sell shares of Energy XXI (EXXI) for a more favorable stock. Cramer said, “I thought the EPL Oil & Gas (EPL) acquisition was terrific by Energy XXI and I don’t want to sell it. But I think you can also buy Marathon Oil (MRO - Get Report)," which is another AAP holding.
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-- Written by Bret Kenwell in Petoskey, Mich.