After a brutal meltdown in the stock market Thursday, are we finally nearing a bottom? Jim Cramer told his Mad Money viewers that the only way to know for sure is to consult his “market bottom checklist, which he last revisited on Jan. 6. Back then, Cramer saw only two items on his checklist that signaled a bottom was getting closer.
After Thursday’s selloff, is there a large amount of negativity among investors? Yes. Are the big institutional investors getting clobbered? You bet. Is sidelined money ready to be invested once the bottom is at hand? Yep.
All told, Cramer’s list had seven of 10 items now checked. He said according to most indicators, the markets aren’t quite in oversold territory and there are still many analysts that haven’t started downgrading their favorite stocks. Cramer was also not yet convinced there are enough good earnings this quarter to offset the declines.
But with many more boxes checked than we had just two weeks ago, the bottom is looking a lot closer. We still have more work to do, but investors should keep their shopping lists at the ready.
Stock-Picking Still Works
Earnings season is once again upon us and the big banks have just finished reporting. The results this quarter were all over the place, highlighting the importance of individual stock-picking.
Citigroup (C) – Get Citigroup Inc. Report remains a cheap stock, trading at just 80% of its tangible book value, but the bank did have to pause its stock buyback program due to regulatory issues. JPMorgan Chase (JPM) – Get JPMorgan Chase & Co. Report saw solid earnings, but also saw expenses rise 11%, disappointing investors.
The star of the group was Wells Fargo (WFC) – Get Wells Fargo & Company Report, which saw 13% revenue growth, making it the best performing bank in the sector. Earnings at Goldman Sachs Group (GS) – Get Goldman Sachs Group, Inc. Report came in weaker than expected, and the stock trades at just nine times earnings.
Finally there was Morgan Stanley (MS) – Get Morgan Stanley Report and Bank of America (BAC) – Get Bank of America Corp Report, both of which delivered solid, but not spectacular, results that placed them in the middle of the pack.
Executive Decision: Prologis
In his first “Executive Decision” segment, Cramer welcomed back Hamid Moghadam, chairman and CEO of Prologis (PLD) – Get Prologis, Inc. Report, the warehouse REIT that’s riding the wave of the e-commerce revolution.
Moghadam said market dynamics continue to be highly favorable for Prologis and demand has never been stronger. Not only is e-commerce continuing to accelerate, but companies are building up their inventories for resilience and disaster recovery. And on top of that, consumption is also growing, making for near-perfect conditions for Prologis.
When asked about competition, Moghadam noted that the supply of suitable real estate remains tight in many markets. Prologis has been diligent in its land efforts, however, and has the land to add another 200 million square feet of capacity.
Finally, Moghadam commented on the labor market, saying that not only is the cost of labor increasing, but the availability of labor continues to shrink, forcing more and more customers to turn to technology and automation to get the job done.
Executive Decision: First Horizon National Bank
Turning his focus to regional banks, Cramer spoke with Bryan Jordan, chairman, president and CEO of First Horizon National Bank (FHN) – Get First Horizon Corporation Report. Shares of First Horizon are up 18% over the past year.
Jordan explained that First Horizon is in a great position to capitalize on rising interest rates. A full 65% of its loan portfolio reprices monthly and will generate more revenues as rates rise. The company continues to see strong deposit rates and margin expansion, both of which paint an optimistic picture to the bank in 2022 and into 2023.
Jordan did not expect to see a decline in loan demand as a result of small interest rate hikes. He said while some sectors, like energy and oil drilling, are not yet seeing an uptick in activity, other sectors, like transportation and distribution, are continuing to invest in their businesses to meet growing demand.
Jordan concluded by saying that he has confidence that the Federal Reserve will be successful in tamping down inflation, especially as many COVID-related issues and disruptions get resolved over the coming months.
Lightning Round
In the Lightning Round, Cramer was bullish on NextEra Energy (NEE) – Get NextEra Energy, Inc. Report, Pfizer (PFE) – Get Pfizer Inc. Report, Sanofi (SNY) – Get Sanofi Report, Lincoln Electric Holdings (LECO) – Get Lincoln Electric Holdings, Inc. Report and AMN Healthcare Services (AMN) – Get AMN Healthcare Services, Inc. Report.
Cramer was bearish on Spero Therapeutics (SPRO) – Get Spero Therapeutics, Inc. Report, Moderna (MRNA) – Get Moderna, Inc. Report, On Holding (ONON) , Allbirds (BIRD) – Get Allbirds, Inc. Class A Report and 23andMe (ME) – Get 23andMe Holding Co Class A Report.
Don’t Ignore the News
In his No-Huddle Offense segment, Cramer said when it comes to investing, you can’t ignore the front page of the newspaper in favor of the business section.
Thursday’s late-day selloff stemmed from the news that France has declared China’s treatment of the Uyghur people a crime against humanity.
Cramer said that’s not a term to be taken lightly, which is why it was able to rattle the markets. If Europe, and indeed the world, takes a tougher stance against China, that would spell bad news for companies like Boeing (BA) – Get Boeing Company Report and others that were looking to China for growth.
Whether it’s COVID or Russia’s posturing toward Ukraine, there are many front-page issues that can, and will, roil the markets. That’s why smart investors need to keep at least one eye on the front page as well as the latest business news.
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