You can save yourself a lot of headaches by sticking with what works, Jim Cramer told his Mad Money viewers Wednesday. That means only investing in companies that make things, at a profit, and return some of those profits to shareholders, while maintaining a reasonable share price for its growth rate. Those criteria may seem daunting, but they're not a restrictive as you might think, and they're the only thing that's working.
Not company that doesn't fit that bill is Netflix (NFLX), which saw its shares crater, down 35% in a single day, after the streaming service reported a stunningly bad quarter. For years, Wall Street chose to ignore Netflix's earnings because the company had subscriber growth. Without that growth, however, investors struggled to put a value on the stock.
The plunge in Netflix took down shares of Walt Disney Co. (DIS), sending them lower by 5.5%. But Disney isn't Netflix, as they have movies, theme parks, cruise lines and ESPN, all of which can offset any streaming service losses at Disney+. Cramer said he'd buy more Disney as the stock declines.
We also heard from two other companies that fit the new bull market model, Procter & Gamble (PG) and Johnson & Johnson (JNJ). Both of these companies are struggling with rising costs, but they have the brand power to raise prices. Both companies are also committed to shareholders with buybacks and dividends.
Cramer also gave a nod to Morgan Stanley (MS), another company with solid earnings and at 3% dividend and stock buyback to reward shareholders.
Finally, there's Tesla (TSLA), which is the exception to the rule. Tesla shares aren't cheap, nor does the company offer a dividend, but the company's growth and success cannot be denied.
Netflix Now What
So what should investors do with Netflix now that shares have melted down? Cramer told viewers the implosion we saw today was absolutely terrifying, but we should have seen it coming.
Netflix only delivered OK earnings when it last reported in January, but more importantly, it warned that this quarter would be bad. That forecast warning sent shares down 22% at the time, but paled in comparison to what we saw today.
As the company explained it, Netflix has four problems. First, it has a technology problem, as many Netflix-connected devices, like TVs, rarely get upgraded with the latest features. Second, many members are sharing their accounts with family members. Third, Netflix finally admitted that it has strong competition. Finally, it blamed a slowdown in the global economy.
The problem, according to Cramer, is that Netflix is now lost at sea, and seemingly has no plans to right the ship. It should lure in new members with a cheaper, ad-supported version, but it chooses not to. Cracking down on account sharing could take up to a year. Meanwhile, the global economy and those aging Netflix-enabled TVs could take even longer to turn in the company's favor.
Given that Netflix knew about these problems last quarter, but still has no plan to fix itself, today's meltdown was deserved.
Off the Charts
In the "Off The Charts" segment, Cramer checked in with colleague Larry Williams for a technical read on where inflation, and the markets, might be headed next.
Williams is a student of history, so when it comes to inflation, he looked at past inflation cycles. He noted that when looking at the sticky and flexible components of the consumer price index, the flexible portion leads the sticky and the flexible peaked last year. Most inflation cycles last 29 months. The current cycle has lasted 14 months, which means we're already halfway through.
What does that mean for the markets? Williams looked at a cycle forecast of the advance decline line, which showed that the markets should be poised for a rally between now and the end of June, with an end-of-summer pullback likely by August.
Oil Services
With oil over $100 a barrel, is now a good time to buy Halliburton (HAL)? The company reported a good quarter, but rival Baker Hughes (BKR) had horrible earnings that brought down the whole group.
Cramer said what's bad for Baker is good for Halliburton, because Halliburton is the best-of-breed operator. The company is seeing strong demand and is raising forecasts as a result.
Much of the growth Halliburton is seeing stems from oil producers favoring shorter-cycle investments, which can be spun up to meet rising prices, but also ramped down quickly before prices fall. This is great news for Halliburton, which makes more money from these short-term engagements.
With shares trading at just 15.5 times earnings, Cramer said he'd be a buyer of Halliburton on any weakness.
Lightning Round
(In the Lightning Round, Cramer was bullish on Intuitive Surgical )(ISRG)(, Banco Santander )(SC)(, Axon Enterprise )(AXON)(, Brunswick )(BC)( and Regions Financial )(RF)(. )
Cramer was bearish on Uranium Energy (UEC), US Bancorp (USB), OneMain Holdings (OMF) and AstraZeneca (AZN).
No Huddle Offense
In his "No Huddle Offense" segment, Cramer said with so much doom and gloom in the markets, he wants to take the other side of the trade, betting on American small business and the American consumer.
It's easy to look at the macro economic environment and assume that everything is horrible. But if you look at individual companies, you see another story. Both Paychex (PAYX) and Bank of America (BAC) told us that small business is flourishing this quarter, with Bank of America adding that the American consumer has more savings and is beginning to spend more.
Cramer said he's betting that even if our economy does dip into recession, it will be a mild one, making it the perfect time to invest in America.
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