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While the stock of Grand Canyon Education looks attractive here, it could reverse course depending on the outcome of the 2018 midterm elections, CNBC’s Jim Cramer warned on Monday.
“The for-profit education industry tends to thrive under Republican presidents, as Democrats tend to view the whole business as something that’s predatory,” the “Mad Money” host said, backtracking to a caller’s unanswered stock question from August.
So while investors may be tempted by Grand Canyon’s year-to-date gain, 17 percent long-term growth rate and considerably cheap multiple, Cramer wanted that they may need to temper their expectations.
“I think you can put on a small speculative position in Grand Canyon here, but wait until after the election to buy more because the stock might sell off if the Democrats take Congress,” he said.
General Electric’s sudden CEO change may have gained the market’s vote of confidence, but to Cramer, it suggested something more dire.
On Monday, the struggling industrial giant announced that it would replace CEO John Flannery with former Danaher chief Lawrence Culp, a move related to Flannery’s slower-than-anticipated turnaround plans, sources told CNBC.
“When you boot a CEO after just 13 months, the presumption is that the company’s doing far worse than you think,” Cramer told viewers. “Otherwise, why not let Flannery muddle through, right?”
“We learned, once again, that GE is doing far worse than we thought, that the power division is even more of a disaster, and there’s no easy fix whatsoever,” Cramer continued.
But it’s not all bad, he said. Click here to read the rest of Cramer’s take.
Investors may have rallied around SurveyMonkey’s initial public offering last week, but Cramer has spotted some warning signs in his review of the company’s financials.
“Consider me skeptical,” he said on Monday. “While SurveyMonkey has a well-known brand, I worry that it might be a dinosaur.”
Founded in 1999, SurveyMonkey — which came public under its legal name, SVMK Inc. — is a leading provider of cloud-based software that simplifies the process of building and conducting online surveys. While it faces some competition from products like Alphabet’s Google Forms, it has held its own in the space, boasting some 600,000 paying customers as of the IPO.
SurveyMonkey’s financial results, however, tell a story counter to the stock’s slingshot IPO performance, Cramer said. In the first half of 2018, its revenue grew by 13.8 percent, a tepid growth rate compared with the fresh-faced tech IPOs Wall Street usually embraces.
“Don’t get me wrong, Wall Street loves accelerating revenue growth, but 14 percent? That’s not the stuff that dreams are made of,” the “Mad Money” host said.
Click here for his full analysis.
Competing with Amazon isn’t always the kiss of death for a company. In fact, Amazon-induced stock declines can often be chances for investors to turn a profit, Cramer said Monday.
“In practice, Amazon’s often a lot less terrifying than it seems,” the “Mad Money” host said. “Amazon-induced sell-offs often turn out to be terrific buying opportunities because the reality simply isn’t as bad as people expect it to be.”
The supermarket stocks were among Cramer’s favorite “Amazon survivors.” While shares of Costco and Sprouts Farmer’s Market took a hit when Amazon bought Whole Foods, they’ve managed to rally handsomely since the deal.
To see their gains — and read up on other recent “survivors” — click here.
Cramer likes to use the market’s stronger days to talk about what worries him, and on Monday, his chief worry centered on the actions of the Federal Reserve.
“This is a new position for me,” he admitted. “Even after this weekend’s positive trade news, I feel a bit of trepidation in the wake of the Fed’s most recent rate hike.”
Problem No. 1? While short-term rates went up, long-term rates failed to rise with them, making shares of banks — which make money on the difference between long and short rates — give up their gains.
His second issue was with the housing stocks, which, despite the strength of the homebuilding business, have been sliding since the Fed announced it would hike rates once more in 2018 and three times in 2019.
Third and fourth was the weakness in the auto market and in China’s manufacturing data, both of which could have a bearing on the U.S. economy’s growth in the future.
Cramer said the market could get a reprieve from the Labor Department’s nonfarm payroll on Friday, but only if the results are just right.
“If they’re weak, all of these forces will come into play and the recession drumbeat will be too loud to ignore,” he warned. “I am not saying that will definitely happen — we could get a great number — but it’s an ugly possibility that we at least have to look out for.”
In Cramer’s lightning round, he zipped through his take on callers’ favorite stocks:
Starbucks Corp.: “Stock acted very weak today. I’ve got to tell you, I still think this is not the quarter. They are buying back stock left and right, I think [CEO] Kevin Johnson’s doing a great job, but I don’t want to buy it until I see this quarter being booked because I think it’s just going to be OK.”
Novocure Ltd.: “You’ve got to take some off [the table]. Play with the house’s money. That’s a very big gain. We have been behind this stock since the teens. We believe in the technology. Still amazed that it hasn’t been acquired. I like the stock, but, again, I would do a little schnitzel.”
Disclosure: Cramer’s charitable trust owns shares of Danaher, Alphabet and Amazon.
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