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Chaos coming from the White House may have started to become routine, Jim Cramer admitted to his Mad Money viewers Tuesday, but that doesn’t mean your investing strategy should hang on every passing tweet.
There will be winners and losers from today’s surprise announcements of Secretary of State Rex Tillerson’s firing and the blockage of Broadcom (AVGO) deal to acquire Qualcomm (QCOM) , but the trend still favors the bull.
Cramer said today’s news was indeed jarring and will affect the tech sector, with many possible mergers now called into question. Will rising trade tensions with China affect Apple (AAPL) and other tech giants that do business in China? Only time will tell.
But Cramer said he still prefers to evaluate companies on their own merits. He reminded viewers that United Technologies (UTX) , Boeing (BA) and Lockheed Martin (LMT) all saw their shares slide when President Trump singled them out via Twitter, but all are up big in the weeks and months since.
Cramer and the AAP team are following up on the outlook for Broadcom. Find out what they’re telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts PLUS.
On Real Money, Cramer says Trump’s Broadcom move really means, “China, stay out!” Get more of Cramer’s insights with a free trial subscription to Real Money.
Executive Decision: Twitter
For his “Executive Decision” segment, Cramer spoke with Ned Segal, CFO of Twitter (TWTR) , a stock that’s up 42% so far this year.
Segal explained that in the past, Twitter was trying to be too many things to too many people. That led to a lot of mistakes that they’ve learned from, he said. Today, Twitter is a smaller team that’s more focused on a handful of priorities and their success can be seen in their execution.
Twitter still has a lot of work to do, Segal said, but they’re becoming the place to go when news breaks. It was reported today that even Secretary of State Rex Tillerson learned of his firing from one of the President’s tweets.
Among his company’s priorities are making Twitter a constructive and safe environment for its users, and surfacing more relevant content. Local is a great use case for Twitter, Segal said, and one area where they have more work to do in order to make advertising easier.
Cramer said he remains behind Twitter and thinks the company has a lot more room to grow.
Do Your Homework
When you’re buying a stock, make sure you’re buying it for the right reasons, Cramer told viewers. Shares of Square (SQ) are up 206% over the past 12 months, but not all of those gains stem from the company’s stellar 37% revenue growth.
Last fall, Square announced that it was instituting a pilot program that would allow some customers to pay with bitcoin. That announcement, which came at the height of Bitcoin mania, instantly linked the stock to the cryptocurrency, sending it on a wild ride of volatility.
While Square was able to fend off competition from the likes like Apple (AAPL) , Walmart (WMT) , Facebook (FB) and Paypal (PYPL) , all of which have mobile payment systems, it was bitcoin that seemed to worry investors most.
Even after the Square explained on “Mad Money” back on Nov. 15 that the company was merely exploring where payments might be headed, shares continued to ride the wave of volatility.
In the end, Cramer said, the bitcoin program is not a big deal and shouldn’t have any effect on the share price. Eventually, the irrational exuberance will subside, he said, after which the amazing Square story can continue.
Executive Decision: Applied Materials
In his second “Executive Decision” segment, Cramer sat down with Gary Dickerson, president and CEO of Applied Materials (AMAT) , the semiconductor equipment maker at the heart of the tech explosion.
Dickerson explained that the battle for AI and big data will be the biggest battle of our lifetime and Applied Materials is leading the way to help build the best technology and fastest processors. We are about to see major disruption in transportation, healthcare, entertainment and more, he said, and we’re only in the very early innings.
Dickerson added that there are 30 chips in your voice assistant technology, and all of those chips are processing and storing an incredible amount of data. Everything from our cars to our smart devices will be capturing more and more data and that means more technology will be needed to process it all.
When asked about China, Dickerson said that Applied Materials has been in China for 34 years and the country now accounts for $3 billion in revenue. China is a very important market, he said, but we do need fair trade.
In his “No-Huddle Offense” segment, Cramer said while many investors were stunned by the Rex Tillerson firing, he was more shocked by the President Trump blocking Broadcom from acquiring Qualcomm over fears that our intellectual property could end up in China.
Broadcom isn’t even a Chinese company, Cramer explained, as the company only moved its headquarters to Singapore after merging with Avago. Broadcom is already in the process of moving its headquarters back to California.
But in the end, Broadcom does get half of its revenues from China, so there is some logic to Trump’s decision. It’s clear that the administration is taking a tougher stance on China and trade, but the execution of that stance will likely leave investors scratching their heads for a little while longer.
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