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The rate hike is coming and you need to be ready with some cash when it does, Jim Cramer told his Mad Money viewers Friday, as he warned that the risks of a September interest rate hike are now too great to be ignored.
Cramer said he's been selling beloved positions in his charitable trust, Action Alerts PLUS, in order to raise cash so he can buy them back at lower prices. Investors need to be prepared, he added, even if that means missing out on the upside if the Federal Reserve chooses to stay put in two weeks.
As for next week's game plan, Cramer said he'll be listening to Minnesota Fed President Neel Kashkari's comments at 1 p.m. EDT on Monday. He'll also be looking out for earnings from United Natural Foods (UNFI) .
Next, on Tuesday, Cramer said the markets will be focused on the German inflation data, a key metric for how well Europe is faring.
Wednesday brings earnings from Cracker Barrel (CBRL) , which will offer another read on the health of the U.S. consumer. Cramer said he's also waiting to see the outcome of Citigroup's (C) analyst day. If the stock goes higher, then that means the markets are anticipating maybe even more than one rate hike this year.
Also on Thursday, the latest producer price index will be released, along with the consumer price index on Friday. Cramer said these two pieces of data will be the last we get before the Fed makes its decision.
Railroad Stocks Derailed
The railroad stocks have been on fire this year, Cramer told viewers, but that rally is coming to an abrupt end.
After nearly 18 months of declines, Cramer correctly called the bottom in the rails this January. Since that call, shares of CSX (CSX) and Norfolk Southern (NSC) have rallied 31% and 50%. What was behind the rally? Cramer said it was a combination or low expectations, big stock buybacks, strong dividends and a more bullish economy.
But after listening to the earnings this quarter, Cramer said it's clear both the amount of cargo the rails are shipping, and the price they're getting for that cargo, are coming under pressure.
Cost-cutting measures will make the rails a lot more profitable when the economy improves, Cramer concluded, but on the eve of interest rate hikes, these now pricey stocks have a lot less dividend protection to cushion any disappointments. While CSX and Norfolk Southern essentially broke even in this shell game, smaller players, like Kansas City Southern (KSU) , are coming under even more pressure.
What Makes Ollie's Run?
With the dollar stores getting crushed this quarter, what should investors make of Ollie's Bargain Outlet (OLLI) , the discount retailer that came public in 2015 and has seen shares rise over 48% so far in 2016? According to Cramer, a lot.
Cramer said Ollie's has a terrific business model that customers love, offering steep discounts of up to 70% off department store prices. The company is also a perfect regional-to-national growth story, with no stores in over half the country.
When he first looked at Ollie's after its initial public offering, Cramer noted the company looked promising, but he was worried about the pending exits of the company's private equity backers. Since then, Ollie's completed a 12 million-share secondary offering, which dinged shares by 3.2%, and this week completed another secondary for 13.7 million shares, which also took its stock lower by 3.2%. But now that the private equity has moved on, Cramer said he'd be a buyer.
When the company last reported, Ollie's posted a 3-cents-a-share earnings beat on a 16% rise in revenue with expanding gross margins and a 3.5% increase in same-store sales. The stock is expensive, trading at 24 times earnings, but given the growth potential and the recent pullback, Cramer said now is the time to buy.
Executive Decision: Jeff Lawson
For his "Executive Decision" segment, Cramer sat down with Jeff Lawson, founder, chairman and CEO of Twilio (TWLO) , the tech company helping developers build and manage communications in the cloud. Shares of Twilio are up 92% since its IPO earlier this year.
In his first-ever television appearance, Lawson explained that Twilio's goal is to revolutionize communications. He said his company's usage-based revenue model aligns Twilio's success with the success of their customers and supports experimentation and innovation as just about anyone can begin using their service for little cost.
When asked what exactly it does for customers, Lawson said that in the case of Nordstrom (JWN) , Twilio helps connect the retailer's network of personal shoppers with thousands of customers via the Nordstrom mobile app. Twilio not only keeps all of the conversations secure, but also links the conversations to other Nordstrom systems.
Lawson said that services like Uber simply wouldn't be possible without a modern, one-to-one communications system, one that replaces antiquated systems that used dispatchers and centralized call centers to get things done.
No Huddle Offense
In his "No Huddle Offense" segment, Cramer said we cannot have a solid rally if we keep losing the retail sector. He said that retail, while not as big as healthcare or finance, is still important enough to cause concern.
Among the strongest this quarter was Ulta Salon (ULTA) , but Ulta only met expectations, which is simply not good enough. Beyond Ulta was a world of pain, with the dollar stores getting crushed, home improvement weak and even Target (TGT) and Costco (COST) stumbling.
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