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Investors should believe the top brass of a company with a good, long-term track record when its management says it can turn things around, CNBC’s Jim Cramer said Tuesday.
PepsiCo, which has doubled its dividend in the past decade, is one of those names to put faith behind even when analysts are against the odds, he said. The stock is up nearly 4% up from its April 16 close, a day before it delivered better-than-expected first quarter results.
“If you gave PepsiCo the benefit of the doubt, you now have some terrific gains, and even after this move, I still like the stock for the long-term because this team has proven that they can innovate on the fly,” the “Mad Money” host said.
The food and beverage giant, which includes brands such as Frito-Lay, Gatorade, Pepsi-Cola, and Tropicana, has spent money to turn its business around and their plan is working, Cramer said. Frito-Lay has been surging, the North American beverage business got a boost after introducing new packaging formats and new products in Bubly and LIFEWTR, he added.
In its earnings report last Wednesday, PepsiCo revealed that core sales grew 5.2%, its fastest pace in more than three years. The company also recorded profit of 97 cents per share and revenue of $12.88 billion, which topped expectations of 92 cents per share and $12.70 billion revenue.
PepsiCo maintained its full-year guidance, but Cramer said it could be a conservative call to under promise and over deliver.
“In response, the stock surged to new highs and the bears at Goldman Sachs [were] forced to upgrade the stock from sell back to neutral,” he said. “At what point do you think they have to go to a buy, if it goes down 30 cents, don’t you think?”
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Rallies in Hasbro, Qualcomm, Twitter, and Kohl’s on Tuesday showed how investors who bet against a stock can cause a short squeeze and bolster stocks even higher, Cramer said.
Each stock saw double-digit percentage gains during the session, with the exception of Qualcomm, although the company touched a 52-week high in the session.
“Short-sellers provided the ammo for today’s biggest winners: Hasbro, Qualcomm, Twitter, Kohl’s,” he said. “Their pain is your gain.“
Short-sellers, whose strategy is to borrow a company’s shares and turn a profit if its price falls, tend to push a stock even higher if their prediction backfires, as they rush to sell and mitigate their losses.
And the shorts, Cramer said, helped the S&P 500 and Nasdaq Composite close at record highs following a collection of strong quarterly reports. The Dow Jones Industrial Average added 155 points.
“Days like today remind us that short-sellers can serve as rocket fuel for a bull market,” Cramer said. “In other words, when the shorts finally throw in the towel and give up on the stocks they love to hate, these stocks tend to explode higher.”
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Hasbro had “good growth” across multiple businesses in the first quarter and its gaming segment is gaining popularity, CEO Brian Goldner told CNBC.
The toy and board game manufacturer reported earnings of 21 cents per share in its quarterly results, trouncing the 11 cents per share loss that analysts were expecting from the company.
“Our franchise brands were up. Our gaming business was up. Our emerging brands were up,” Goldner said in an interview with “Mad Money’s” Jim Cramer.
Hasbro, the host pointed out, took a hit when Toys R Us filed for bankruptcy about a year and a half ago and left the toymaker with excess inventory. The toy retailer’s eventual closure led to a number of disappointing quarters for Hasbro.
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Doctor On Demand, a private telemedicine service that connects patients with medical doctors, is gearing up to announce a new partnership with Humana, CEO Hill Ferguson told Cramer in a sit-down interview.
“It’ll be the first ever virtual-only plan design which will enable members to see a primary care doctor on their time,” the chief said. “We’re bringing care outside the four walls and into the home or into the car or into the office, wherever you are so that you could see your primary care physician whenever you need them.”
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The stock market could benefit if more people in the general public started investing, but the power’s that be don’t seem interested in making it safe for individual investors, Cramer said.
The host suggested that the uptick rule, a law made to prevent short sellers from putting more pressure on a security that has saw steep declines, should be returned. The Securities Exchange Commission axed the rule in 2007.
“Anyone who favors public investing wants to bring back the uptick rule, but that’s the problem: there are powerful vested interests that don’t really care about public investing,” Cramer said. “The uptick rule gets in the way of how ETFs operate, and that’s like the biggest business today for the stock market is ETF creation.”
An ETF, exchange-traded fund, is a collection of stocks that tracks a specific index.
Additionally, Cramer pushed that the average person should be able to own 100 shares of stocks in companies that they like.
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In Cramer’s lightning round, the “Mad Money” host gave his thoughts on callers’ stock picks of the day in rapid speed.
CarGurus Inc.: “Well, I gotta tell you my viewers, including you Scott, are smarter than I am. I like Carmax, but we are going to do a deep dive on Cargurus because of exactly what you just told us. Because you teach us.”
Iamgold Corp.: “Well, you know what, I am not gold. I am Barrick Gold. I like the work of [CEO] Dr. Mark Bristow … That would be the way I go.”
Align Technology: “Look, they’ve got Danaher … [and] 3M against them and you know what, Align still owns the market. I was too negative. Align as got it going.”
Disclosure: Cramer’s charitable trust owns shares of Danaher and Kohl’s.
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