Cramer Remix: Surprise! Defense stocks' struggles aren't linked to tariffs

March 10, 2018
  • “Mad Money” host Jim Cramer gives a fresh perspective on what could be causing defense stocks to fall recently.
  • Cramer also sits down with the CEO of upcoming telecom GTT Communications.
  • In the lightning round, Cramer tracks the investing controversy in the stock of Twilio.

Tariffs may have gripped the market’s narrative for most of the week, but CNBC’s Jim Cramer found one group of stocks declining because of something totally different.

Responding to a caller’s question on the stock of Raytheon on Friday, the “Mad Money” host said another geopolitical story was putting pressure on the defense company’s shares.

Shares of Raytheon tanked at Wednesday’s open and spent the rest of the week restoring its stature, ending Friday’s trading session up 0.34 percent.

“There are a lot of people who feel that Raytheon is going to be fine on the tariffs but bad on a peace treaty with North Korea,” Cramer explained. “That’s why the defense stocks didn’t do well.”

Cramer's game plan: Stop the hysteria and go to work

This week reminded Cramer that the stock market often acts more reasonably than investors might expect.

“If you sold stocks when everyone was panicking on Monday, you made a big mistake. The fears turned out to be overblown,” he said on Friday. “I’m proud of the fact that I predicted this and I told you … please don’t freak out ahead of time.”

President Donald Trump’s tariffs on steel and aluminum imports kept a lid on stocks for most of the week as market-watchers parsed what they would mean for U.S. allies and the economy.

But as the policy loosened, with Trump announcing potential exceptions for Canada, Mexico, and other countries, stocks started to climb again.

Things only got better when Friday’s employment report from the Labor Department showed strong job growth without inflation, giving the major averages another boost.

“So many commentators have a tendency to get hysterical whenever something scares them, even a little,” Cramer said. “Despite the endlessly negative news coverage, the reality is that good things can happen, too, and when they do, we get terrific days like today.”

With that, Cramer turned to his weekly game plan with a host of retail earnings.

Kroger killing supermarket stocks?

When shares of supermarket chain Kroger tanked following the company’s earnings report, Cramer knew he had to explain the stock’s roller-coaster action.

The “Mad Money” host himself was shocked when Kroger’s stock ran from $21 in October to $31 at the end of January on practically no news.

But this week marked a turning point for the stock: after already falling from $28 to $26 the day before the earnings report, shares of Kroger slipped even lower, to $22 a share, after the call.

“I think this time, the analysts have pretty much had it with Kroger’s promises and what amounts to bizarre, almost faith-based investing in the stock,” Cramer said on Friday.

And given all of the pressure on Kroger, Cramer cautioned investors against investing in any of the grocery plays.

The real driver electrifying Axon

Even Cramer was taken aback by the blowout quarterly earnings report from Taser maker Axon Enterprise.

Shares of Axon roared 28 percent the day after the report and another 14 percent in the next week, making Cramer wonder how Wall Street managed to underestimate it so dramatically.

But Axon, which changed its name from Taser International 11 months ago, hasn’t exactly been sitting still.

A law enforcement technology company, Axon has broadened its specialty from non-lethal weapons like tasers to evidence capture technology, specifically audio recorders and body cameras complete with evidence management and computer-vision software.

But for Cramer, the biggest positive driver for Axon wasn’t the stock’s 82 percent run since Smith’s “Mad Money” interview or its burgeoning software business or its management’s wildly positive future guidance.

“The most bullish thing about this quarter … was about [CEO] Rick Smith’s new compensation package,” Cramer said.

GTT Communications CEO on cloud adoption

Broadband player GTT Communications may only have about 1 percent market share by its own estimates, but that’s hardly stopping the company, CEO Rick Calder told CNBC on Friday.

In an interview with Cramer, Calder said that in his industry, he sees “a set of incumbents that are distracted, that are focused on mobile, on content.”

But while competitors fight with the Justice Department over buying media companies, GTT is focused on connecting businesses via private internet networks to their data centers, and by extension, to the cloud, Calder said.

“IT organizations, CIOs, are beset by a core challenge,” the CEO said. “They’re saying, ‘I want to take my IT ops out of my office and move them to Amazon, to Azure, to Google Cloud, to SAP, to Oracle.’ What they’re saying is ‘I need bigger pipes. The bandwidth into my office is not big enough. It has to be secure. It has to be diverse. I need someone who understands how to get multiple access lines into each and every one of my offices.’ That’s what we do. And we do it significantly better than the incumbent telcos and we think we have a tremendous opportunity to take their share.”

Lightning round: Twiddling your thumbs on TWLO?

In Cramer’s lightning round, he zoomed through his take on some callers’ favorite stocks:

Twilio Inc.: “This is a very controversial story because they screwed up a couple of quarters and then they’ve come back. This is [CEO] Jeff Lawson. I think he’s a terrific guy. They lost a customer, they had a customer come back and now their business is booming. So what can I say? I think it’s a good situation but they were volatile. But it’s good now.”

Amarin Corporation PLC: “I used to like this stock. It is a real speculative stock. I mean, I’m talking about a real speculative stock. As long as you’re willing to recognize that you can lose what you invested in that one, I’m OK with it.”

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