What’s the one thing consumers are willing to pay more to get? That was the question Jim Cramer asked of his Mad Money viewers Tuesday. The answer, Cramer said, is prestige, and it’s on full display with Estee Lauder (EL) , Ralph Lauren (RL) and Apple (AAPL) .
Consumers are willing to pay up for the perception of quality, Cramer said, and it was prestige that vaulted shares of Estee Lauder higher by 11.6% Tuesday, with shares of Ralph Lauren tacking on 8.3%. Even beaten down Apple was able to add another 1.7% by the close.
Estee Lauder said on the company’s conference call that they continue to see strong long-term fundamentals. The brand is expanding their customer base and turning devoted users of their products into life-long fans. Meanwhile, Ralph Lauren is winning over a whole new generation of customers thanks to a growing list of celebrity influencers that include Hugh Jackman and Lady Gaga.
Cramer said both of these companies, along with Apple, know how to manage their prestige for maximum gains over the long-term and that’s exactly what investors should be looking for in their portfolios.
Cramer and the AAP team are focusing on earnings this week. 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.
You Can’t Please Everybody
It’s extremely hard to please both growth and value investors, Cramer told viewers. Anyone who listened to the Alphabet (GOOGL) conference call saw that first hand, he said, as analysts barraged the company with questions relating to its moonshot projects and its growing $109 billion cash hoard.
Value investors applauded Alphabet’s prudence, which has allowed it to double its cash position in just the past five years. But growth investors were looking for more than just buybacks and dividends. They want bold acquisitions to spur more growth. That’s exactly what IBM (IBM) did with its $34 billion purchase of Red Hat, Cramer said, and after initially being panned, the deal is already beginning to show promise.
How should Alphabet spend its billions? Cramer didn’t offer any suggestions, but said these companies should ignore short-term thinking and stay focused on continued long term success.
Over on Real Money, Cramer’s diving into the paradox of weak industrials and strong tech. Get more of his insights with a free trial subscription to Real Money.
Be Aware of Risks
In a special interview, Cramer sat down with cybersecurity expert Robert Herjavec, founder and CEO of the Herjavec Group, as well as one of the stars of “Shark Tank” on CNBC.
When asked why the Chinese, North Korea and other nations continually attack the U.S., Herjavec said it’s the old adage about why people rob banks — because that’s where the money is. The United States, he said, has the most intellectual property and the most important secrets in the world, so naturally, everyone is trying to get their hands on them.
Turning to the topic of the growing feud between the U.S. and Chinese telco equipment maker, Huawei, Herjavec said he advises clients to avoid Huawei and other Chinese suppliers. He said you can never underestimate the power of low prices however, and companies are more than willing to spend less today, even if it means potentially disastrous consequences down the road.
Herjavec also commented on Facebook (FB) and that company’s fallout from its data breaches. He said while consumers may not care much about privacy, governments certainly do and the backlash is only just beginning for Facebook. The government is there to protect us, Herjavec added, and that’s exactly what they’re doing in Europe.
In a time when the electronic world is increasingly interconnected with the physical, mechanical world, we can no longer choose to avoid the risks, Herjavec concluded, which is why we’re seeing so much investment into technology and cybersecurity.
Off the Charts
In the “Off The Charts” segment, Cramer checked in with colleague Bob Moreno for a new take on the direction of the markets. Regular viewers will recall Moreno called a bottom in the stock market back on Dec. 11, and while the shift didn’t actually come for another two weeks, the resulting decline was indeed a buying opportunity as Moreno predicted.
Moreno first returned to a weekly chart of the Nasdaq, noting the symmetry of the December decline, which was 700 points. That was the same size decline the index saw in October and November. He also noted the stochastic and Chaikin Money Flow oscillators both turned positive right as the market bottomed near Christmas.
Moreno next looked at a monthly logarithmic chart of the Nasdaq, to note that the index, when put into a percentage context, never fell below its eight-year moving average.
That led Moreno to determine that the market has entered a consolidation period that will likely not end until September of 2019. Even though the S&P 500 has rallied 16% from those December lows, he saw resistance at both 2818 and the 2930 levels, which which time the markets could turn sharply lower.
In a second interview, Cramer sat down with Gary Zimmerman, CEO of the privately held MaxMyInterest, a company helping consumers do better than the 0.1% interest they are currently earning, on average, with their savings accounts. MaxMyInterest customers average 2.38%.
Zimmerman explained that in the 10 years since the financial crisis, many consumers have been trained that cash doesn’t pay anything, but that simply isn’t true. Most people just don’t know about their options.
With MaxMyInterest, Zimmerman explained that customers link their checking accounts to high-yielding online savings accounts and each month, his service will direct funds to where the maximum savings are. As it turns out, banks are happy to allow their customers to make more on their money, while helping to cement their relationships with them.
Customers of Max can open online savings accounts in as little as 60 seconds and account are FDIC insured.
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