CNBC’s Jim Cramer has concluded that running a profitable, growing business in this market is kind of like walking a tightrope, with value investors who want to see cost-cutting on one side and growth investors who want to see spending on the other.
“Keeping both groups happy is a real high-wire act — in all honesty, I’ve never seen a CEO be able to pull it off for an extended period,” he said.
What set him off on Tuesday? Google parent Alphabet’s Monday night conference call, in which the technology giant’s management team went over its fourth-quarter earnings report with shareholders and Wall Street analysts.
“Multiple analysts excoriated them … for spending like a drunken sailor with no end in sight,” Cramer said on “Mad Money.” “However, what really threw me was a question tossed out by a very good analyst, Brent Thill from Jefferies.”
Thill, a top tech analyst, asked management what they planned to do with the company’s huge cash hoard. He pointed out that it “has doubled in the last five years to $109 billion” despite Alphabet’s deal activity being much lower than that of its peers.
“Alphabet was circumspect with its answer, but I think Brent’s question cuts to the core dilemma of being a big, profitable growth company, because, in a way, all of that cash can be a curse,” Cramer said.
Click here for more on why big tech companies get flak for their cash — and what they can do about it.
Investors can make long-term moves during this uncertain year for markets by buying shares of companies that are poised to make a lot of money with their “prestige power,” Cramer said on Tuesday.
While consumer confidence dipped to its lowest point in 1.5 years last month, the “Mad Money” host says brands that have a loyal following will “hold up in tougher times” because customers will find a way to stick with their favorite products.
“People will pay up for prestige,” Cramer said. “Today, we had one of the most amazing displays of prestige power that I can ever remember with the stocks of Ralph Lauren, Estee Lauder, and Apple — three of the most prestigious brands around all exploding higher.”
Shares of Ralph Lauren and Estee Lauder gained more than 8 and 11 percent, respectively, after the luxury fashion label and beauty business beat earnings estimates and raised guidance for 2019. Apple is trading 12 percent higher “thanks to the endless parade of buying” since reporting mixed earnings on Jan. 29,” he said.
Click here for more on why Cramer thinks these brands have real staying power.
The rise of interconnected devices and systems, known broadly as the internet of things, poses a serious threat to global cybersecurity, Shark Tank entrepreneur and cybersecurity expert Robert Herjavec told Cramer on Tuesday.
“There was an attack in December on the LA Times. Didn’t get a huge amount of publicity, but it was significant because they hacked their back-end systems for payroll, came in electronically, and affected the printing presses,” he said in the “Mad Money” interview. “On the surface, not a massive attack, but what’s significant is they went through an electronic, back-end system, payroll, internet of things, and because the presses are connected with the internet of things, they stopped mechanical systems.”
The fact that those hackers managed to affect the mechanical world after initially breaking into an electronic system can be very dangerous if it’s taken too far, said Herjavec, who is founder and CEO of his own cybersecurity firm called Herjavec Group.
“What are mechanical systems? Pipelines, all kinds of hospital systems, everything in the world,” Herjavec said. “The world is becoming so interconnected, and all of those access points can be hacked. If you’re a big corporation, you’ve got to listen to this. You’ve got to take care of it.”
Click here to watch Herjavec’s full interview and hear about some of the other risks facing the digital sphere.
Investors can afford to be “cautiously optimistic” at this point in the stock market’s cycle, Cramer said Tuesday after consulting with chartist Rob Moreno.
Moreno, the technician behind RightViewTrading.com and Cramer’s colleague at RealMoney.com, sees a convoluted path ahead for stocks. After calling the December bottom, Moreno noticed that the Nasdaq Composite’s late-2018 decline was about a 24 percent drop from peak to trough.
That’s important because, in a bull market, stocks tend to see “periods of consolidation — pauses in a long-term bull run,” Cramer explained. “To [Moreno], the decline here looks very similar to what we saw from the Nasdaq in 2011, 2015 [and] 2016,” three consolidation periods of recent past.
If he’s right, that could be bad news for the bulls, who may have to wait at least seven months for stocks to break out of their consolidation pattern, during which they tend to trade in a tight range, Cramer warned. But Moreno still sees some opportunity for investors.
Click here for the full analysis.
Since the financial crisis, people have been “lulled” into thinking that their cash doesn’t earn anything, but it actually does, MaxMyInterest founder and CEO Gary Zimmerman told Cramer in a Tuesday interview.
“If you think about the 10 years since the financial crisis, interest rates had been near zero, and everyone is sort of lulled into the idea that just cash doesn’t pay anything, but it turns out it does,” the CEO said. “In fact, all this time, it has yielded something, but most people don’t know about it.”
Enter MaxMyInterest, a private company that helps its customers make the most of their money. After Zimmerman’s own experience working at a major bank that almost failed during the financial crisis, he realized just how much financial firms make from unknowing clients’ bank accounts.
“About 50 percent of the profit of the major brokerage firms, in their wealth management divisions, comes from the spread that they earn on client cash,” he told Cramer. “So what we want to do is really bring more efficiency and transparency to this market and help people earn more on their idle cash.”
Click here to watch Zimmerman’s full interview and find out how MaxMyInterest works.
In Cramer’s lightning round, he ran through his reactions to callers’ stock questions:
1-800-Flowers.Com Inc.: “They crushed the quarter. They crushed the quarter, but this is traditionally when a lot of people come in to buy this stock ’cause of Valentine’s Day. I got my cards, how about you guys? But I don’t think you should buy it up here. I would not be a buyer.”
Roku Inc.: “It’s a winner. I’m not fighting Roku anymore. It’s a winner.”
Disclosure: Cramer’s charitable trust owns shares of Alphabet and Apple.
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Originally published at CNBC