The earnings season is always the time when the winners are separated from the losers, but Jim Cramer told his viewers on Wednesday for Mad Money that some companies deserve the benefit of the doubt.
Case in point: Netflix (NFLX) – Get report, which reported weaker-than-expected results, which includes a slowdown in subscriber growth. When asked about it during conference calls, management explained that yes, growth is slowing down after a huge surge at the start of the pandemic.
While many investors wanted to sell the news quickly, Cramer said he was taking the other side of the trade and giving Netflix the benefit of the doubt.
To see a slowdown after pandemic, Netflix is not a bad business, especially considering how little new content was produced in 2020. It will not take more than an instant film or two to grow again.
Cramer noted that all the FAANG shares (Cramer’s abbreviation for Facebook (FB) – Get report, Amazon (AMZN) – Get report, Appel (AAPL) – Get report, Netflix and Alphabet (GOOGL) – Get report) deserves the benefit of the doubt. Amazon continues to innovate, such as Wednesday’s announcement of touch payments coming to Whole Foods. Apple is continuing to diversify its non-iPhone products, something that, according to smart analysts, will increase Mac sales in the long run.
Although investors use a ‘sum-of-the-part’ analysis to value Google, Cramer said he gives the company the benefit of the doubt. Why? Because they deserved it.
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Executive decision: Qualtrics International
In his first Executive Decision segment, Cramer spoke with CEO Zig Serafin and founder and CEO Ryan Smith of Qualtrics International. (XM) – Get report, the experience management platform with shares up 12.7% for the year, ahead of Wednesday’s strong earnings announcement.
Serafin said Qualtrics had just completed a record quarter with a net retention of 120% as customers expanded their use of the Qualtrics platform. For a growing number of companies, an experience management platform is becoming just as critical as their customer relationship and human resources platform.
Smith added that it is not only companies that need to deliver good experiences, but also governments. Therefore, the state uses Missouri Qualtrics to gather valuable feedback on their vaccine distribution program.
Using Qualtrics, companies like United Parcel Service (UPS) – Get report could offer their customers better experiences, while Royal Caribbean Cruises (RCL) – Get report could ask their guests how they would like to see voyages return after the pandemic.
Executive Decision: Marvell Technology
For his second ‘Executive Decision’ segment, Cramer also spoke with Matt Murphy, president and CEO of Marvell Technology Group (MRVL) – Get report, the semiconductor manufacturer with shares rising 3.5% on Wednesday when the company closed with the acquisition of Inphi. Marvell is currently an Action Alerts PLUS company.
Murphy said he was delighted with the Chinese approval to end the Inphi acquisition. He said the merger would combine two large companies.
When asked about the state of the semiconductor market, Murphy confirms the imbalance between supply and demand, noting that demand for chips has never been greater. He said the market is still driven by an increase in 5G wireless, cloud migration and strong innovation in the automotive sector.
Murphy also commented on Marvell’s long-term partnership with Samsung. He said Marvell is a major supplier to Samsung for many of their 5G wireless products and their alliance remains very strong.
Executive decision: PPG
For its final segment “Executive Decision”, Cramer lured Michael McGarry, Chairman and CEO of PPG Industries (PPG) – Get report, the manufacturer of materials and covers that just posted a sample earnings of 31 cents per share, which rose shares by 2.7%. Shares of PPG are now up 20% for the year.
McGarry said PPG continues to make selective acquisitions that make sense. The company has completed six in the last 18 months. He said many of these acquisitions have better returns than a simple share buyback.
Simply put: “We are very good at this,” McGarry added. For example, many of their recent acquisitions in Europe were not in Asia or China. But PPG was able to quickly use their resources to expand immediately to those regions.
PPG contains a lot of things you would not think of, McGarry said. Their appliance industry has grown by 14% over the past quarter, with sales rising from everything from electronic materials to kitchen sinks. His company also has a strong military business that accounts for a third of PPG sales.
Finally, McGarry notes that electric vehicles are a great opportunity for PPG. Battery cabinets need paint, as well as adhesives and seals, he said. It also requires protective coatings, fillers and other materials.
Cramer said PPG is a real company with real earnings and real growth.
Where the bargains are
In his segment “No Huddle Offense,” Cramer talked about those who believe the stock market is dangerous. While there are plenty of reasons to worry about SPACs, NFTs and meme stocks, there are still plenty of stocks.
Take, for example, the bidding war for the Kansas City Southern Railroad (KSU) – Get report. He said sometimes companies are willing to pay a lot more for a company than the market, and Kansas City Southern just proved it.
Lightning Round
Here’s what Cramer had to say about some of the stocks the callers offered Wednesday night during the “Mad Money Lightning Round”:
Cut (SNAP) – Get report: “I think they’re going to have a great term with fantastic growth.”
Regal-Beloit (RBC) – Get report: “This company is fantastic and I’m not talking enough about it.”
Boston Scientific (BSX) – Get report: “It’s amazing, intuitive surgical (ISRG) – Get report is wonderful and so is Edwards Lifesciences (EW) – Get report and Medtronic (MDT) – Get report. “
Cleveland-Cliffs (CLF) – Get report: “The Chinese spend on iron ore and that’s a winner in my book.”
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At the time of publication, Cramer’s Action Alerts PLUS was a position in FB, AMZN, AAPL, GOOGL, MRVL.