How do you say game-changer? How do you define disruption? In a word, Amazon (AMZN) , Jim Cramer told his Mad Money viewers Friday. The magnitude of Amazon's purchase of Whole Foods Market (WFM) for $13.7 billion simply cannot be understated.
Sure, Whole Foods only has 400 locations, but that's for now. The company had plans to triple that store count and, with Amazon's backing, will likely continue with that plan. Add to that Amazon's ability to provide a game-changing online and front-door delivery experience, Cramer said, and it's clear that the revolution is here.
So who are the winners and losers in this deal? Amazon is of course the big winner, along with shareholders of Whole Foods. Outside of those two groups, there are no winners, Cramer said.
Grocers Supervalu (SVU) and Kroger (KR) will only continue to suffer as they struggle to compete on price. Target (TGT) will likely also struggle to reignite its grocery business. The suppliers to grocery stores, like United Natural Foods (UNFI) and Hain Celestial (HAIN) will likely see their margins squeezed.
Cramer said that Costco (COST) may be able to recover, but not until more analyst downgrades emerge. The 7% decline in the stock today is likely not the end of the selling.
Make no mistake, this news will weigh heavily on the grocery sector, Cramer concluded, making what was a challenged group yesterday a hideous one today.
What's Your Game Plan?
Next week's game plan includes a number of key earnings reports, Cramer told viewers, but he's going to start the week in Europe, listening to comments out of the Paris Airshow, where Boeing (BA) and others offer details into their order books.
Also on Monday, an analyst meeting from United Technologies (UTX) , which should have good things to say. Next, on Tuesday, there will be an analyst meeting from Action Alerts PLUS holding General Electric (GE) and Cramer said he expects a positive update, especially in aerospace.
Homebuilder Lennar (LEN) , Fedex (FDX) and Adobe Systems (ADBE) , (another Action Alerts PLUS name) will also be reporting. Cramer was bullish on all three, but advised waiting for a pullback in Adobe after it reports.
Wednesday brings earnings from Carmax (KMX) , a stock Cramer said he doesn't want to own, but it's still a call worth listening to. Oracle (ORCL) also reports, and Cramer said he's bullish as cloud computing expands to more companies.
Finally on Friday, Blackberry (BBRY) reports, but Cramer said investors have already missed this rally. He's more interested in the Baker Hughes (BHI) rig count numbers, to get the latest read on crude oil prices.
Cramer and the Actions Alerts PLUS team say they're confident in their oil stocks. Find out what they're telling their investment club members about Magellan Midstream (MMP) and Dow Chemical (DOW) . Get in on the conversation with a free trial subscription to Action Alerts PLUS.
Put me in, Coach
Is it time to take a victory lap in Coach (COH) , the luxury retailer that's up more than 32% since Cramer first recommended it a year ago? It's clear the company is getting its groove back, but is there still more room to run?
Cramer said he's a big fan of Coach's new CEO, Victor Luis, but retail turnarounds take time, and this one has been in the works since Luis took the helm in January 2014.
Luis was quick to begin fixing Coach's woes, killing off the company's more affordable items, closing underperforming stores and remodeling those that were working. With the brand's aspirational touch restored, shares of Coach bottomed in September 2015 and numbers began improving in early 2016.
Then the company acquired Stuart Weitzman, a luxury shoe maker, and then Kate Spade (KATE) last May for $2.4 billion. Cramer said it's clear now that Coach aims to be a house of luxury brands, a strategy that is working.
Even trading at 19 times earnings, Cramer said Coach is a buy given its rising same-store sales and its growth opportunities with the combined brands.
More Winning Combinations
In a slowing mergers-and-acquisition market, (outside of Amazon, of course) there are still ways to profit from companies tying the knot. Case in point, the tie-up between Praxair (PX) and the German Linde Group, which will combine the No. 2 and No. 3 industrial gas suppliers into the top dog of the industry.
Cramer said the deal, announced in December, won't likely close until 2018, but the combined company will have $30 billion in sales, with a global footprint that includes 43% North America, 26% Europe and the Middle East. The combined company, which will retain the Linde name, expects to see $1.2 billion in cost savings despite the fact both companies have complimentary core competencies.
Cramer said the best way to play this fabulous deal is by simply buying Praxair, which still trades right here in the U.S.
In his "No-Huddle Offense" segment, Cramer said that for as long as he can remember, some relationships always held true. When unemployment falls below 5%, inflation will surge, when GDP forecasts get cut, the industrials lose their luster. When the economy is roaring, the department stores do well. And consumer packaged goods stocks grow at 2% to 3% a year and trade in line with the averages.
But in today's world, none of these still apply. We have low unemployment and low inflation. The industrials are surging while the retailers are languishing. And consumer packaged goods are growing at a snail's pace of 1% to 2% a year, but are trading at market premiums do to their dividend yields.
This new world drives the pundits and fund managers crazy, which is why investors are chasing growth no matter where they can find it. And that's what the tech sector has going for it.
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Read TheStreet's full coverage of Amazon's purchase of Whole Foods:
- Amazon's Big Deal for Whole Foods Is So Alarming That the Government May Not Let It Happen
- California Congressman Questions Amazon-Whole Foods Deal as Bezos Critic Trump Stays Mum
- Watch: Why Walmart, Target, Costco, Kroger and Dollar General Should Be Terrified of the Amazon-Whole Foods Deal
- Amazon-Whole Foods Deal Is a Win for Activist Investor; Trump's New Course for Cuba -- ICYMI Friday
- Watch: Take a Look At Amazon's Amazing Journey
- Tech Sector Slides for Second Week but Amazon Scores Big
- Watch: Amazon's Move to Purchase Whole Foods Is 'Disruption of Society,' Jim Cramer Says