In some cases, buying shares of companies facing lawsuits can pay off if you’re patient and willing to withstand headline risk, CNBC’s Jim Cramer said Wednesday.
Right now, there are five high-profile situations “where lawsuits are or could be front and center” for stocks, Cramer said: the Qualcomm-Apple dispute, the lawsuits facing Johnson & Johnson for alleged ties between its talc and cancer, the Malaysian government’s fraud allegations against Goldman Sachs, the District of Columbia’s recently announced case against Facebook and the potential for litigation against Allergan for selling breast implants that allegedly cause cancer.
If Apple loses the Qualcomm-Apple battle, it could have more downside, Cramer admitted. But if the iPhone maker settles with Qualcomm, the stock could bounce, the “Mad Money” host said.
As for Johnson & Johnson, while a loss could hurt the company, the stock has already shed more than $50 billion in market value, Cramer said. He suggested waiting a week and seeing if the story dies down before buying.
Goldman Sachs will likely have to settle with Malaysian authorities, but that debacle will likely end there, even if it takes months, he said.
Facebook’s Cambridge Analytica ties might hurt in the short-term as that lawsuit progresses, he added, but he didn’t think they would derail the company’s business model.
And Allergan is a wait-and-see situation for Cramer, who said that while the danger of its implants was well-known, the headline risk will be high for the foreseeable future.
“Every one of these lawsuits is a serious taint,” he acknowledged. “However, the stocks have already been hammered. It’s more headline risk going forward. But if you can handle the negative headlines and you can be very patient, I actually think you’re getting some very nice long-term buying opportunities, but the operative term — please — is, indeed, long term.”
Cramer was surprised stocks didn’t plunge even further on the Federal Reserve’s Wednesday decision to hike interest rates by a quarter-point.
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all sank to new lows for 2018 after the Fed’s announcement, in which the central bank also forecast two more hikes in 2019, down from three as previously stated. The Dow gave up what had been a 381-point intraday gain to close 351 points lower.
“If anything, I was surprised at how well the averages held up today,” Cramer said. “You could easily argue that we should’ve been down 1,000 Dow points. [It] would’ve made a ton of sense given what I heard.”
“But because the market was already so oversold, the worst it’s been since the lows in February, the downside was more limited,” he explained.
Click here for his take on the Fed’s decision and where stocks go from here.
Wall Street may have balked at Micron Technology’s most recent earnings report, driving shares of the chipmaker to a new 52-week low Wednesday, but the company’s CEO told CNBC that the weakness wouldn’t last very long.
The “most important thing is that the end-market demand drivers for memory and storage continue to be vibrant,” Sanjay Mehrotra, president and CEO of Micron, told Cramer in an exclusive interview on Wednesday.
Shares of Micron shed more than 6 percent in after-hours trading following the company’s Tuesday earnings report, which missed analysts’ earnings and revenue estimates. The stock lost another 7.92 percent in Wednesday’s session.
But Mehrotra said that Micron and other companies in the semiconductor space were working to fix the supply-demand imbalance that has plagued commodity chipmakers in recent months.
Click here to watch and read more about his interview.
With Amgen, Teva Pharmaceuticals and Eli Lilly all chasing market share with new drugs for treating migraines, the path to success is “a horse race between three great companies,” Eli Lilly’s CEO, Dave Ricks, told CNBC on Wednesday.
In September, Eli Lilly received approval from the Food and Drug Administration for its migraine treatment, Emgality. While Amgen and Teva’s competing treatments had already been approved by then, Ricks told Cramer in an interview that the battle was far from over.
“We’re three or four months behind Amgen, one month behind Teva,” he said on “Mad Money.” “It’s a horse race between three great companies, but we have some skills that we think will come into play.”
Ricks, whose company’s diabetes and psoriasis drugs have enabled it to raise its 2019 outlook, said Eli Lilly’s technology and ability to reach customers could be major advantages in treating migraines, which affect roughly 30 million Americans.
Click here to watch and read more about his interview.
Cramer also checked in with chartist Carley Garner, who argued that stock market pessimism was peaking and stocks could be close to a “sustained rebound.”
Garner, co-founder of DeCarley Trading and the author of Higher Probability Commodity Trading, said charts of the U.S. dollar suggested that it was overbought “or at least … overheated,” Cramer said, meaning that U.S.-based international companies could soon get “a real boost.”
She also noted that even at Wednesday’s lows, the market was only down 15 percent from its all-time highs.
“In short, she thinks that the 2017 rally got a little ahead of itself, so we needed to spend 2018 digesting these enormous gains, which we’ve been doing,” Cramer explained. “Maybe we need another pullback to finish the process, but from a technical perspective, Garner believes the recent declines are unremarkable.”
All in all, her interpretation of the charts suggested “that the pessimism may have gotten overblown here, even with a hostile Federal Reserve, and there’s a case to be made that the market could potentially be ready to rebound,” the “Mad Money” host continued. “Although she could just as easily see a further 7 percent decline here, so perhaps you should keep your head down. Where am I? I know the market’s really oversold. I kind of want to split the difference. I think we can rally, and then I think we get slammed again. Why? Because the Fed is not on your side.”
Click here to watch the full video of Cramer and Garner’s analysis.
In Cramer’s lightning round, he rattled off his responses to callers’ stock questions:
Cyberark Software Ltd.: “I like Cyberark. Why? Because safety against cyber-terror never takes a vacation.”
Washington Prime Group: “Oh my god, 20 percent yield. I mean, what does that tell you? If that’s not a red flag, what’s a red flag? That’s worse than having a touchdown called back when you’re playing Dallas. I’ve got to tell you, I don’t trust it. I don’t trust it. It’s a little stock, but you can still lose, and that one’s scary to me.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Johnson & Johnson and Goldman Sachs.
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