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Cramer: After the Election Has Come the Great Business Thaw

Posted at 2:49 p.m. EDT on Thursday, Dec. 8, 2016

We now realize we will look back at Election Day 2016 and say the world has changed. You may hate or like the election results, but one thing is certain: Just getting it over with turned out to be a big deal, and if there can be a follow-up to all the business campaign promises Donald Trump made, many of these moves will be totally justified.

What's really dawning on people right now is exactly how frozen our nation was by this election and how unthawed it seems to be now.

In fact, it seems that as we got closer and closer, business seemed to fall off a cliff, leading up to the denouement where, as Richard Galanti, the fabulous Costco (COST - Get Report) chief financial officer, said on his conference call: "I think it was worse than a snowstorm in terms of nobody wanting to go out and buy stuff, and that's what I read about other retailers as well." No wonder his stock's rallying all day. The floodgates have been opened.

What we are really learning, though, is it wasn't just with retailers, it was pretty much every nook and cranny of business. Think about the amazing thing Gary Kelly, the terrific CEO of Southwest Air (LUV - Get Report) , said just last night, that business has just gotten better and better since that day.

Or how about what Manny Chirico said when he was on Mad Money. Manny had just reported blowout earnings for PVH (PVH - Get Report) , the apparel company of which he's CEO, but he was cautious about the holiday season. However, when I pressed him, what did he say? How about that the weeks after the election were gangbusters across the board, and Manny's got merchandise in every major department store in this nation. The retailers have been rallying pretty much nonstop since then.

It extends to homebuilders, which now find their stocks on fire. How can they not when Toll Brothers (TOL - Get Report) just told us its backlog is up double digits and there are positive demand trends pretty much everywhere. These are come-one, come-all situations where if Toll rallies, you see big moves in the whole group. I see Lennar (LEN - Get Report) , Pulte (PHM - Get Report) and Horton (DHI - Get Report) breaking out. Most important, our fave, KB Home (KBH - Get Report) , which has the best California land--that most scarce commodity--is just ripping. We have been advocating that another homebuilder should scoop up KB Home for about a 30% gain now, and I don't think it's over.

Remember, housing punches above it weight. When you see home sales rocking, think Lowe's (LOW - Get Report) , think Home Depot (HD - Get Report) , think paint, rugs, furniture, tools. The ripple effects are astounding.

I think we will find it extends to a host of travel and leisure issues, too. Notice that Disney (DIS - Get Report) is now up 10 bucks since the election? Some of that could be the numerous trial balloons we have seen about spinning off ESPN or selling it, or making an acquisition that makes Disney less dependent on its current offerings. But I bet a lot of it will turn out to be a surge in bookings. (Disney is part of TheStreet's Trifecta Stocks portfolio.)

Yes, it is that big a deal. You think those flights by Southwest are just going to Houston? Think again.

It's even tech. I keep coming back to that strange cut in forecast by the always-reliable Workday (WDAY - Get Report) where it cited, among other things, the election as a major reason for companies holding off buying complex cloud-based software. Now I have to wonder if there hasn't been a recovery or some pickup in orders since then and that Workday might be worth some speculation.

Hey, that shouldn't be all that revelatory. Remember the other day when Western Digital (WDC - Get Report) pre-announced much-better-than-expected earnings and said lots of devices were doing well, even personal computers. Could this be boding well for Best Buy (BBY - Get Report) , especially given that Costco said televisions were strong?

Hey, dare I say that maybe even sales for the Apple (AAPL - Get Report) iPhone may have picked up? Big-ticket items bought when people feel better about themselves? Why not? (Costco and Apple are part of TheStreet's Action Alerts PLUS portfolio.)

Now we all know about the obvious Trump stocks. Bank of America (BAC - Get Report) , a.k.a. the First National Bank of Trump, keeps rallying like a house on fire, the best pure bank play out there.

Goldman Sachs (GS - Get Report) has truly turned into golden slacks for those who fit in; the best Dow stock is now up 34% for the year and has soared from $175 to $241 since the election. Why not? It's a quintessential brokerage house where higher rates make them more money, more deal activity and stock and bond activity make them more money and, more important, deregulation can make them fortunes. Goldman Sachs, where I proudly worked, hasn't been able to offer as many services to help clients and certainly hasn't been able to take as much risk as it used to for itself. It would have been really hammered under a President Clinton-Senate Banking Chief Elizabeth Warren. I was expecting show trials by now.

Instead, it's a celebration with a Treasury Department headed by a sharp former Goldman partner, Steve Mnuchin, and the possibility that the bank's awesome No. 2, Gary Cohn, may be going into the government. The lineage here is extraordinary. Mnuchin is the son of the legendary Mnuch, Bob Mnuchin, also known as the Coach who ran the Goldman trading desk. That's been the most hampered division under Dodd-Frank. It must be like Prometheus Unbound over there.

Then there's oil and gas. Holy cow, as we said last night, this administration doesn't just want to look the other way with oil and gas, it wants to promote it, perhaps by more generous tax breaks with an eye, no doubt, toward destroying OPEC by unleashing our technology to extract and not letting protesters block pipelines, which are a heck of lot safer ways to move oil than trains or trucks, the current alternatives.

Finally, though, there's the oddities we keep discovering from changes made in this election. How about the sell to buy recommendation for Scotts Miracle-Gro (SMG - Get Report) , out of Bank of America/Merrill (BAM - Get Report) today? Why? Because "this is not your dad's grass company." The brokerage house took its price target from $80 to $105 because Scotts is a leader in hydroponics, a medium commonly used, they tell us, to grow cannabis. Yep, the legal base for growing marijuana increased by 125% since the election, driven, BAM says, "by California's recreational approval." Sure, plain old business makes up 90% of their sales, but they're thinking hydroponics could jump 50%, because "this grass has room to grow." I love this quote: "Scarcity strengthens the case for SMG with few public equities at similar levels of sales and market cap offering exposure to the theme of marijuana legislation."

Yep, every day we keep finding out new winners stemming from either the end of the nasty slugfest between the candidates, specific issues that were changed by the election--like marijuana growth--and the gale-force winds powering the Trump stocks.

No, nothing will be straight up. We see some profit-taking in some of the more obvious winners, sans banks. We know the drug stocks are still getting drubbed. We know the president-elect could pick up the phone and call a bunch of those pharma execs, or not bother with them and launch some vicious tweets.

But the most important thing to remember is that in many ways, not just politically, we've got a BE and an AE going, before election and after election, because it isn't just a change in the White house, and every day it amazes us exactly how different the business world is vs. one month ago.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL and COST.

 

Cramer: Why Lululemon's Surprise Sales Beat Should Come as No Surprise

Posted at 6:30 a.m. EDT on Thursday, Dec. 8, 2016

So much for the "out with athleisure in with denim" theory that so many analysts fell for. It may be right at some level, but it sure doesn't apply to Lululemon ( LULU - Get Report) .

For months now, literally months, we have heard analyst after analyst say that LuluLemon's time has come and gone because its pioneering style of athleisure has been copied by so many and has ceased to be cutting edge.

Not only that, but because we heard from a couple of stores and from PVH (PVH - Get Report) that denim is back as a hot trend, there simply wasn't enough room on the shelf for both.

Athleisure's finished. Denim's supreme.

I have always in my career called this "thesis" reporting, meaning some clever people in the hedge fund or analyst community have looked over the landscape, seen too many weak sales of the kind of apparel that Lulu makes-but from other companies--and drawn a conclusion that shoppers have gone elsewhere.

They throw in that apparel companies have seen some real growth in denim, especially PVH with its Calvin Klein jeans, and they decide that it is all about a broad switch to denim, a zero-sum fashion statement that is supposedly LULU's final obituary--because, over time, there have been many of them written.

But here's what these critics and their acolytes and short-selling buds forgot: LULU didn't comply with those expectations. It's 34% earnings per share growth, its five-year plan to double revenue, its 7% combined comparable store sales (omnichannel and bricks and mortar) and its 420 point gross margin expansion, put the lie to the athleisure to denim exodus.

More importantly, perhaps, is that Lulu may be at an inflection point where it is growing from a provincial maker of yoga clothes to a men's and women's worldwide clothier that's opening stores in China and London that could produce huge numbers. China, in particular--where two stores are springing up in Shanghai and one in Beijing, followed by perhaps another two stores in Shanghai in 2017--could change the complexion of the company's sales given that, out of nowhere, Lulu sold 10,000 items on Singles Day, far more than this company thought possible.

It reminds me of that first inflection point back in the fall of 2013 when
Growth Seeker holding Under Armour (UA - Get Report) went to China. That stock was in the low $20s, and although it has been soft of late, two years later it had advanced to the mid $50s.

After yesterday's quarter, such a move in LULU wouldn't shock me, the numbers were that good.

Now there are many rather pedestrian and prosaic theories about why Lulu did so well: new bras with 20% sales gains, including the Free to be Zen and Energy Bras, to get really granular. Or the ABC pants, (yes, Anti-Ball Crushing), or new fabrics from the lab that, like Under Armour, work best in high-intensity sweating situations.

But innovation--the tech company that happens to make apparel rubric--is only part of the story.

It's really something more ethereal. I believe the main reason the analysts got it wrong is because Lulu is, indeed, bigger than a brand. I think Lulu stands for something. In the time I have spent with the CEO, Laurent Potdevin, I have learned exactly how much this man gets about the way younger people think. He knows that people go to Lulu because it embraces much of the culture and the zeitgeist of those who want to be healthy and sustainable. He said it best on the call: "I think it's really important to differentiate from the athleisure trend and from how people want to live their life. And I think that Lulu is the only brand out there that is truly a metaphor for how people want to live their life and how they want to move."

He went on to bust the Lulu-to-denim thesis entirely: "So you could argue that either the space is really crowded and we have a lot of competition or we have very few." I think it's the latter because, as he goes on to say "As long as we focus on function and innovation and bringing value to our guests, we really don't see any risk to the market that we've created and we continue to lead."

Or, as he told me last time I sat down with him, Lulu is about mindfulness, it is about being in the moment, it's about all the things Wall Street laughs at or could care less about--but the customers crave. And they, not Wall Street, determine the numbers.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL and COST.