Here are Jim Cramer's top thoughts on some of the biggest stories of the week.

Jim Cramer: On the Innovation Spectrum, ADP Is No Clorox or PepsiCo

Innovation is exhausting and hard. It is so much easier to do the same old, same old and just keep delivering irrespective of the competition and the changing environment.

I heard three stories about innovation Wednesday, and all three explain why the "brilliant disruption" that is occurring makes it so difficult to win for the older brands.

First, the "brilliant disruption" term came from a tutorial Indra Nooyi and Hugh Johnston put on yesterday in a tour de force conference call from PepsiCo Inc. (PEP - Get Report) that moved the stock from down two on an organic revenue slowdown to up two from the low and a flirting with even despite the organic surprise. (PepsiCo is a holding of my Action Alerts PLUS charitable trust.)

The pirouette wasn't all about wizardry on the call. A lot of it was recognition that there was only one market of real weakness, and that was carbonated beverage. Of course, that's the most visible because it is the company's namesake and because it has a behemoth competitor in Coca-Cola Co. (KO - Get Report) .

Plus, it wasn't really just carbonated that slipped. Gatorade had some degradation, which was explained away by weather and, to a certain degree, by a rise in gasoline prices at convenience stores, although the latter seems a little suspect because gas prices didn't rise all that much from historic lows.

What matters, though, is that PepsiCo talked about how it invested too much in some smaller brands at the expense of some of the big ones, and that a balance has to be found to keep the organic growth up if you are going to create value to shareholders -- something Nooyi feels mightily, given her stock incentive is 50 times greater than her cash incentives.

She has to find the right balance between supporting snack and beverage innovation and not losing share to Coca-Cola and Dr Pepper Snapple Group Inc. (DPS) in the beverage aisle or newcomers in the snack aisle, at the same time taking small brands to medium and ultimately larger ones. It's a quandary, and by their own admission they got it wrong.

Clorox Co. (CLX - Get Report) , on the other hand, has an analyst day and its combination of innovation and purchasing of new brands plus a more organic and natural orientation approach to older ones -- witness the transformation of Burt's Bees to be as chemical-free as possible for all sorts of health cosmetics -- is giving the company more organic growth than PepsiCo, 4% last quarter at Clorox versus 1.7% for PepsiCo.

Clorox is off a much smaller base, but it is inventing new categories and spending for them. Last year the company paid $295 million for Renew Life, a supplements company, to augment its healthy offerings. You need to watch this business, chiefly its probiotic once-a-day enzyme line, because it is going to burst into the club stores in the fourth quarter in a very big way starting with Sam's Club. Clorox is going to make probiotics into a household staple because Benno Dorer, the terrific CEO of Clorox, knows that these supplements can settle the stomach into a healthy routine no matter where you go and, to a certain degree, no matter what you eat.

It's a fragmented category that's about $7 billion and growing and it is as integral as Burt's Bees and Brita to the next leg of Clorox's growth. PepsiCo is so huge that this entry would mean nothing to it,

But it could be very special for Clorox.

Finally, there is Automatic Data Processing Inc. (ADP - Get Report) , the dominant payroll processing company, the one being challenged by Bill Ackman from Pershing Square. I have no idea if Bill is going to win but, like Nelson Peltz's challenge to Procter & Gamble Co. (PG - Get Report) , Ackman is citing complacency and the failure to innovate and digitize as chief reasons for the company's inability to grow faster than 6%, as it did last quarter.

Automatic Data is a very well-run company, but it has been slow to innovate technologically and Ackman says it has a bloated payroll and is losing business to a more innovative and digitized Paychex Inc. (PAYX - Get Report) when they go head to head.

Here's the issue as I see it. When I interview the CEOs of Workday Inc. (WDAY - Get Report) and ServiceNow Inc. (NOW - Get Report) , I see companies that are the real share-takers in the human resources space and that can become the real payroll players if they want to because they are cloud-based, which is inherently cheaper and better than the way things have been done before.

That's really a challenge to incumbents such as SAP (SAP - Get Report) and Oracle Corp. (ORCL - Get Report) . That said, though, this Automatic Data business is wide open to them and ADP hasn't been able to transfer its business to the cloud -- it is mostly on premises -- in part because, Ackman would argue, it is fat and happy. It is hard to disagree with him, even though ADP is dominant.

My point? Dominance breeds complacency. Complacency breeds business loss. ADP hasn't innovated like Clorox or PepsiCo. That's why it is being challenged.

I have no idea if Ackman will win, but I do think that his ratios, such as employee to revenue growth, are good yardsticks, and for the moment ADP isn't living up to the challenge. It can, but it's late; Clorox is early, and PepsiCo is in between. No wonder ADP is being challenged. It makes sense, even if it rights itself; it did miss out big on what Workday and ServiceNow have accomplished and I simply don't know why that occurred except a pure lack of innovation, and that's a failure that has hurt them badly even as they remain dominant in their own aisle of the financial services supermarket.

Join Jim Cramer, CNBC's Jon Najarian and Other Experts Oct. 28 in New York

Jim Cramer will host CNBC's Jon Najarian, TD Ameritrade's JJ Kinahan, famed analytics expert Marc Chaikin and other market mavens on Oct. 28 in New York City to share successful strategies for active investors.

You can join them as they discuss how smart investors can make the most of options trading, futures contracts, fundamental and quantitative analysis and great ETFs to buy right now. Participants will also get a chance to meet Jim and other panelists and take photos.

When: Saturday, Oct. 28, 8 a.m.-3 p.m.

Where: The Harvard Club of New York, 35 West 44th St., New York, N.Y.

Cost: Special early bird price: $150 per person. (Normal price: $250)

Click here for the full conference agenda or to reserve your seat now.

More From Jim Cramer
Action Alerts PLUS, which is a charitable trust co-managed by Jim Cramer, is long PEP.
 
Originally published Oct. 5 at 7:59 a.m. ET.

Jim Cramer: 10 Stocks That Have Driven the Dow

How did we get up here? How did this market get so high? How do we keep hitting these records and what's driving this bus?

On a day when the averages are doing pretty darned well, I think it's worth it to look at the top 10 contributors to the Dow's 4.9% increase from 21,349 to 22,405 in the third quarter. Sure, the index is a little atavistic -- I mean, where is FANG in this darned thing? -- but it might help us get a better understanding about why this market has so much staying power.

You don't bring up FANG idly on a day when the acronymic tech four horsemen are roaring and then dismiss them, so let me go over what's going on with them before I get to the main event. To that end, I have discouraging news as FANG has out of nowhere become an undiversified acronym courtesy of ETFs that lump these stocks together. The stocks of Facebook (FB - Get Report) , Amazon  (AMZN - Get Report) , Netflix (NFLX - Get Report) and Google  (GOOGL - Get Report) , now Alphabet, were doing absolutely nothing until we learned that Netflix was putting through a 10% price increase for its most popular plan. I have long felt that I would be willing to pay much more for a couple of services: Apple's web service, Netflix, Amazon Prime and Spotify. I bet Netflix gets no pushback whatsoever. The price increase ignited the stock of Netflix, which then took the rest of FANG up as there was no meaningful news on the rest of the acronym. The ETFs that lump these four together were pulled up by Netflix and that's all she wrote.

I wish there was more to it, but I looked at every single piece of news out there and, if anything, it was filled with negatives.

But that's the new ETF-obsessed world for you.

Now how about those 10 Dow stocks responsible for the most recent leg of the rally and the reasons for their elevation. What do they teach us?

Let's start with Boeing (BA - Get Report) , which contributed 37.5% of the Dow's point gain, a colossal chunk of the action. There were two reasons why this stock rallied. The first is that it won a huge number of orders, far more than anyone expected, because the airlines around the world are quite flush.

The second is the analysts were pretty negative on the cash flow and cost side here, especially from the Dreamliner, which is in rapid production. It doesn't hurt that Boeing is also part of the "defend yourself" wave of investing, meaning that other countries are being asked to defend themselves and that helps Boeing. So does a Republican Congress. It converted a huge number of analysts with that last quarter.

Second is Caterpillar (CAT - Get Report) , with a stock that contributed 16% to the advance. Cat's stock went up for several reasons: blowout quarter after orders picked up while inventories were low and employment lean, a return to growth in China and Europe and the demand that came from the hurricanes in this country. Like Boeing, there was tremendous skepticism about CAT. The skepticism's been replaced by rampant optimism.

We don't think of the banking stocks as big movers, but they have been and Goldman Sachs (GS - Get Report) contributed 10.8% to the Dow's gain. Goldman, by its own admission, didn't have a terrific quarter, but the regulatory regime is growing less onerous and I think that's going to make it so the company will be able to boost its return on equity. It's also been a big beneficiary of what we call multiple expansion, meaning that people are willing to pay more for the same earnings estimates because they have grown more optimistic that those estimates will be hit or beaten.

The fourth driver is a total oddity: Chevron (CVX - Get Report) with a stock that contributed 9% to the Dow's third-quarter gain. Oil's done basically nothing for several years, but Chevron proved it would have no problem paying its very large dividend and has been able to ratchet back spending while still producing a ton of oil. I wish I could say something else was at work other than the company's done an excellent job navigating a lower oil environment. But maybe that's enough for this market.

Next up is Visa (V - Get Report) , which was responsible for 7.8% of the advance. The stock has generated great returns year after year in large part because we are still a worldwide paper society that is converting to plastic. Visa's been riding that wave forever. I think what shocked people here is that the modern-day Visa was built by Charlie Scharf, who retired from the job and turned the reins over to Al Kelly, who seems to be doing every bit as good a job as Scharf. I was concerned and I told members of the Action Alerts PLUS club that when Charlie retired it was time to book the big gain. I was wrong. Kelly's terrific and Visa's business is humming.

The failure to repeal and replace benefited the incumbents, and no incumbent company fared better than United Health (UNH - Get Report) , which had pulled out of numerous exchanges in which it was losing money, and that led to an explosion in profits and a healthy 7.5% contribution to the Dow jump. Even after this run, the stock remains one of the cheapest I follow, and if it would ever come down I would love to add it to my charitable trust, which you can follow by subscribing to Action Alerts PLUS.

Few stocks were as hated as the retailers going into the quarter and one of the least favored was the stock of Home Depot (HD - Get Report) . It sure wasn't because of the quarter, which was magnificent. It was fears of Amazon teaming up with the pathetic Sears  (SHLD) to challenge Home Depot in that lucrative business. I usually have nothing but praise for Amazon's moves, but this one was pure poppycock. So when the hurricanes hit, you can only imagine the rush back into the stock, which has always been a winning way to trade terrible events wrought by Mother Nature. Home Depot's resurgence added 7.2% to the Dow.

How about Apple (AAPL - Get Report) ? It contributed 7.2% to the advance largely because it delivered a better-than-expected quarter with a very big service stream and because analysts started talking about the big supercycle that comes from its new iPhones. Apple also converted a lot of naysayers into believers as now there seems to be as many bulls as there were bears 50 points ago. (Facebook, Alphabet and Apple are part of TheStreet's Action Alerts PLUS portfolio.)

The stock of American Express (AXP - Get Report) had been disliked for ages because of faltering, disappointing earnings. Not this time. It delivered and it promised it would get back to its old normalized level of profitability. The stock was in the low $80s at the beginning of the quarter and when it gave you a heads up that the good old days were back, it went to $90, where it was before the decline. That's how it was responsible for 4% of the gain.

The last of the 10? The stock of Microsoft (MSFT - Get Report) , which, with its advance, added 3.9% to the rally. Microsoft's Azure has become a dominant cloud player and that's made it so the company's got accelerating growth. It's become a real winner and I think it will stay that way when it reports. It's becoming a must-own tech name for the sleep-at-night gaggle of big-time portfolio managers.

When you look at this helpful group in its entirety, you can see some important object lessons. First, there were a lot of skeptics circling around these stocks who got converted to true believers. Second, in a low-rate environment, a solid dividend can give your stock a big leg up. But third and perhaps most important, there's a lot of money coming into this market through indexing and these stocks are beneficiaries of the deluge of passive investments. Put simply, these stocks went higher in large part because they were the only game in town, cash-heavy equities of companies that are doing better than we thought they could do in a slow-growth era.

And that's precisely what's driving this remarkable move that is as memorable in its advance as it is forgettable in the way it's happening.

Join Jim Cramer, CNBC's Jon Najarian and Other Experts Oct. 28 in New York

Jim Cramer will host CNBC's Jon Najarian, TD Ameritrade's JJ Kinahan, famed analytics expert Marc Chaikin and other market mavens on Oct. 28 in New York City to share successful strategies for active investors.

You can join them as they discuss how smart investors can make the most of options trading, futures contracts, fundamental and quantitative analysis and great ETFs to buy right now. Participants will also get a chance to meet Jim and other panelists and take photos.

When: Saturday, Oct. 28, 8 a.m.-3 p.m. ET

Where: The Harvard Club of New York, 35 W. 44th St., New York, N.Y.

Cost: Special sale price: $150 per person. (Normal price: $250)

Click here for the full conference agenda or to reserve your seat now.

Originally published Oct. 5 at 5:26 p.m. EDT.

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

  • How Equifax should have slammed the selling window shut
  • How towel throwers are always late to the game
Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's--and reader comments--in real time.