Chinese stocks, especially ones that are new to U.S. markets, may seem like appealing investments, but to CNBC’s Jim Cramer, most of them aren’t worth the risk.
In 2018, 31 Chinese companies had initial public offerings on U.S. stock exchanges, up from 12 the year before. The 2018 deals raised about $8.5 billion in gross proceeds, accounting for roughly 18 percent of the U.S. IPO market.
But aside from a few decent names like Tencent Music Entertainment, which Cramer tentatively recommended after its IPO in December, investors should steer clear of this volatile group, the “Mad Money” host said.
Still, “there are some exceptions,” he told investors Monday. “Larger companies from China with higher profiles do tend to perform better. […] If you absolutely have to dabble in Chinese IPOs, please, stick with the larger, high-quality companies that we know more about, that even can be household names like Alibaba.”
But, even with Alibaba, he insisted that you should invest “only if you want to go there.”
Weaker-than-expected earnings results from Nvidia and Caterpillar managed to lead stocks lower on Monday, but not as low as they should have, and that’s notably unusual, Cramer said.
“The pin action [was] surprisingly muted,” he said. “This is some wacky, crazy sort of bull market. It’s one that really doesn’t want to go down.”
Much of that is fueled by money managers hanging on to hope, whether it’s that the United States and China can come to an agreement on trade, or the Federal Reserve will keep its plans for interest rates on hold, Cramer explained. Now, he sees it filtering into their buying and selling decisions.
“Now, big money managers are willing to press their bets even in the face of really ugly numbers like we got from Nvidia and Caterpillar. Rather than focusing on the current weakness, these fund managers are thinking about how things might look down the road,” he said. “Today’s big takeaway is that this market is extraordinarily resilient, especially considering how far we’ve come since the bottom.”
Click here to watch his full analysis.
The Federal Reserve should take note of recent earnings results from railroad operators Union Pacific and Norfolk Southern ahead of its next interest rate hike, Cramer said Monday as stocks sold off.
“See, the rails are a terrific proxy for commerce in America, and after listening to the conference calls last week from Union Pacific and Norfolk Southern, my feeling is that we still have a very strong economy,” he said.
“However, our economy also seems to be decelerating just enough to keep the Federal Reserve from hitting us with another rate hike anytime soon,” Cramer warned.
On the surface, both companies’ results were strong, topping analyst expectations and showing notable bright spots in the business.
But when it comes to the Fed, whose Open Market Committee will meet this Tuesday and Wednesday to decide on next steps for interest rates, the results weren’t so clear-cut, Cramer said.
Click here to read his full take.
The most important trend happening in the oil market has to do with China, oil guru and RBN Energy President and Principal Energy Markets Consultant Rusty Braziel tells Cramer.
Braziel, a frequent “Mad Money” guest who has correctly predicted several oil price collapses in recent years, referenced the commodity’s price drop in October of last year. After starting the month near four-year highs, crude oil prices saw their biggest monthly drop in over two years.
Since October, oil prices have been trading lower, a trend some have connected to incipient economic weakness in China. While Cramer wasn’t convinced by that line of thinking, Braziel said in a Monday interview that it actually had merit.
“If demand in China is down, if the economy in China is down, that means the total demand for crude oil is going to be down. If crude oil demand drops, then total demand drops, then … crude oil prices are likely to decline, too,” Braziel said. “As a matter of fact, that’s really the most important thing that’s going on right now, and it’s what happened back in 2014.”
Click here to watch and read more about his full interview.
After a monumental 2018 for cannabis — with Canada passing full legalization, the first pot company going public on the U.S. stock market and the substance becoming even more mainstream — Cramer is now looking ahead.
“I still think that legalized weed is one of the great growth stories of our era,” he said Monday. “So, for those of you who want to speculate on the bull market for bud — hopefully at lower levels than where we are right now — I’ve got five predictions for the future of the marijuana industry.”
Click here for his five predictions.
In Cramer’s lightning round, he flew through his responses to callers’ stock questions:
The Clorox Co.: “You are paying a high multiple for Clorox. One of my themes this week and last week was the high multiple you’re paying for safety. I like Clorox. I regard it as the best of the consumer packaged goods. But always remember it is an expensive stock, and I’d prefer to get it at maybe a 3 percent yield instead of 2.6. But [CEO] Benno Dorer is doing terrific.”
T. Rowe Price Group: “A lot of people have turned a lot on all of these stocks that have to do with equities, picking equities. This yields 3 percent. It’s a very well-run company. I’m not going to tell you to go away from it. I’m going to tell you to go toward it.”
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