The buyers and sellers have spoken, and they believe Federal Reserve chair Jay Powell is getting tough on inflation, Jim Cramer told his Mad Money viewers Thursday. That means the hyper-inflation theme is now off the table, where it should have been all along.
As Cramer noted Wednesday, the only thing surprising about the Fed news was that so many people were surprised by it. Powell has made no secret that he’s not afraid of a little inflation, especially if it allows the economy to recover, jobs to be created and new businesses to be formed.
And even though Powell doesn’t plan to raise rates anytime soon, money managers have already dusted off their interest-rate playbooks and started selling the industrials and the commodities, with Caterpillar (CAT) – Get Report off 3.5% and FreeportMcMoRan (FCX) – Get Report falling 5.1%. Even oil reversed course, with WTI Crude down 1.5%.
There are still plenty of stocks left to buy, however. Cramer endorsed FAANG, (his acronym for Facebook (FB) – Get Report, Amazon (AMZN) – Get Report, Apple (AAPL) – Get Report, Netflix (NFLX) – Get Report, and Alphabet (GOOGL) – Get Report) along with Microsoft (MSFT) – Get Report. He called out Nvidia (NVDA) – Get Report, which rose 4.7%, and Advanced Micro Devices (AMD) – Get Report, which rallied 5.5%, as two great stocks to own. Outside of tech, Cramer said the home builders are still going strong. And while he’d avoid the financials, financial tech, like Square (SQ) – Get Report and PayPal (PYPL) – Get Report have become favorites.
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Executive Decision: Azek
In his first “Executive Decision” segment, Cramer spoke with Jessie Singh, president and CEO of Azek Co. (AZEK) the decking material company with shares that plunged 6.5% Thursday as lumber prices continued to retreat.
Singh started off by saying that lumber prices have no bearing on the demand for Azek’s wood alternatives. Their best-selling prices cost four times the price of lumber, but customers buy them because they’re beautiful, zero maintenance and over the long term, provide better value.
Singh added that they’re still seeing a lot of tailwinds in the market, including the continued housing boom for new construction and a strong remodeling trend. There are over 60 million decks that are past their useful life in America, Singh said, and that makes Azek very bullish about its future.
When asked about sustainability efforts, Singh reminded viewers that Azek uses hundreds of thousands of pounds of recycled materials, which makes its footprint even better than virgin timber products. He said there’s still a lot of work to be done to educate consumers about the benefits of recycled decking materials.
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Focus on Eastman Chemical
Following up on Wednesday’s interview with chemical maker LyondellBasell (LYB) – Get Report, Cramer highlighted yet another chemical company you might not have heard of, Eastman Chemical (EMN) – Get Report.
Eastman has a fairly short history as an independent company, but a storied history as the Eastman in EastmanKodak. The company has many diverse end markets, from agriculture and construction, to retail, transportation, and health and wellness.
While shares are up 62% over the past two years, Eastman has been under pressure recently as investors fret rising interest rates and the linger effects of winter storm Uri. But unlike many chemical makers, Eastman fared the storm fairly well and returned to 95% capacity in less than three weeks. The company is forecasting 20% to 30% earnings growth this year.
Trading at just 13 times earnings with a 2.4% dividend yield, Cramer said he’s a big fan of Eastman, especially given the company’s efforts in molecular recycling, which aims to process 500 million pounds of plastic waste every year.
Executive Decision: Clean Energy Fuels
For his second “Executive Decision” segment, Cramer also spoke with Andrew Littlefair, president and CEO of Clean Energy Fuels (CLNE) – Get Report, the natural gas provider that’s seen its shares soar 19% after being featured on the WallStreetBets Reddit forum.
Clean Energy Fuels is no stranger to the natural gas revolution, but Littlefair admitted that demand for natural gas as a bridge fuel didn’t materialize the way they expected. That’s why the company pivoted to RNG, or renewable natural gas, which is made from the methane in animal waste. This new focus caught the attention of Amazon, which recently partnered with Clean Energy Fuels and has the ability to take a 20% stake in the company.
Littlefair explained that America uses 35 billion gallons of diesel fuel every year, and it creates five to seven billion gallons of animal waste that could be converted into natural gas. And while that might not sound like a lot, five to seven billion gallons translates to 20 billion gallons of diesel. That makes Clean Energy a win-win for both removing methane and replacing dirty diesel with cleaner burning natural gas.
Rate Hikes Destroy Demand
In his “No Huddle Offense” segment, Cramer reminded viewers that interest rate hikes don’t fix inflation by creating more supply, they fix things by destroying demand.
For example, our country has a growing shortage of truck drivers. That is causing inflation. Raising interest rates will only slow the economy, putting the few truck drivers we have out of work. How is that the right solution?
Lumber prices are still up big for the year, even though they’ve fallen 40% from their highs. We could fix this problem by raising interest rates until no one can afford to buy it, or President Biden could simply lower the tariffs on Canadian lumber so that supply and meet our growing demand.
Raising interest rates is rarely the answer to our nation’s problems, Cramer concluded, which is why those calling for the Fed to raise rates ASAP are missing the bigger picture.
Here’s what Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
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At the time of publication, Cramer’s Action Alerts PLUS had a position in FB, AMZN, AAPL, NFLX, GOOGL, MSFT, NVDA, AMD, ABT.