When there’s not enough of anything, everything gets more expensive, Jim Cramer told his Mad Money viewers Tuesday. But eventually, things get so expensive they stop selling. Today we learned that Target (TGT) – Get Target Corporation Report has a glut of hard goods like appliances and TVs. And while that’s bad news for Target, it’s a welcome sign for consumers and investors.
When retailers have too much inventory, prices get slashed and outlets thrive. That’s great news for cash-strapped consumers. It’s also great news for the Federal Reserve, as it’s the first sign that our economy is cooling. The Fed might soon not need multiple 50-basis-point rate hikes, instead relying on a more measured approach.
Target’s 2.3% decline Tuesday is also great news for investors. It signals that the most beaten down names, like tech, may have finally bottomed.
The tech stocks broke down in November, when the Fed first signaled rate hikes were coming. But now that the first signs of a slowdown are upon us, those future earnings at tech companies will quickly come back into vogue. Remove inflation and technology now offers growth at a reasonable price.
Investors can also look into the recession stocks, like healthcare and consumer packaged goods. Both JM Smucker (SJM) – Get J.M. Smucker Company (The) Report and Eli Lilly (LLY) – Get Eli Lilly and Company Report closed higher, as investors fled to safety.
You don’t have to overthink it, Cramer concluded. Investing is as simple as buying growth stocks when interest rates begin to fall, as they did earlier today.
Executive Decision: Lyft
In his first “Executive Decision” segment, Cramer sat down with John Zimmer, co-founder and president of ride sharing giant Lyft (LYFT) – Get Lyft Inc. Report.
Zimmer painted a bullish picture, saying that after shutting down 70% of its business during the pandemic, the recovery is now at hand. The company saw “good signs” this quarter, he said, and more and more riders returned to the platform.
While there are 20% more riders per driver, the recovery has not been equal. East Coast markets are at 90% of pre-pandemic levels, while West Coast markets are only at 50%.
Zimmer said he was encouraged by these results as well as the possibilities for all of Lyft’s mobility options, including bikes and scooters and the return of ride sharing, which was disabled throughout much of the pandemic.
Executive Decision: e.l.f. Beauty
For his second “Executive Decision” segment, Cramer also spoke with Tarang Amin, chairman and CEO of e.l.f. Beauty (ELF) – Get e.l.f. Beauty Inc. Report, the cosmetics maker that saw shares soar 5.1% on strong earnings.
Amin said that e.l.f. continues to build a lot of market share as consumers continue to see both prestige and value in their products. e.l.f. just passed Revlon as the No. 4 cosmetics brand globally.
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When asked about inflation, Amin noted that e.l.f. has a two-tier pricing structure and they made no changes to pricing not their value products. That move was much appreciated by consumers. The company did raise prices on some prestige items, however, but has not seen any decline in sales.
Turning to the strength of their brand, Amin said that e.l.f. has always been a pioneer in the digital world and, “We are where Gen Z tends to be,” making them a favorite amongst younger consumers.
Executive Decision: Broadcom
For his third “Executive Decision” segment, Cramer checked in Hock Tan, CEO of Broadcom (AVGO) – Get Broadcom Inc. Report, the semiconductor maker that closed up 2.1% today. Shares currently trade for just 15 times earnings with a 3% dividend yield and a recently announced $10 billion stock repurchase agreement.
Tan said Broadcom’s acquisition of VMWare will be a huge win for the company, as VMware perfectly aligns with their strategy of providing companies with all of their core technologies, including hardware and software.
With Broadcom’s products, companies can build, test and deploy their applications anywhere, whether it’s on premise, in a private cloud or the public cloud, Tan said.
Broadcom also remains committed to its shareholders, and the company’s dividend and buyback are proof that they value a long-term shareholder base.
In the Lightning Round, Cramer was bullish on Enbridge (ENB) – Get Enbridge Inc Report, Johnson & Johnson (JNJ) – Get Johnson & Johnson Report, MetLife (MET) – Get MetLife Inc. Report, Chubb (CB) – Get Chubb Limited Report and Target.
Executive Decision: Palo Alto Networks
For his final “Executive Decision” segment, Cramer once again sat down with Nikesh Arora, chairman and CEO of Palo Alto Networks (PANW) – Get Palo Alto Networks Inc. Report.
Arora said ransomware payments are up 71% in recent months. Companies simply can’t wish away their insecure, legacy technology stack, he added, all they can do is start today by building a more secure infrastructure from the ground up.
As for those bad guys, there’s money to be made, Arora said, and the attacks will keep on coming. Companies can be shut down from far away and in the best case situation, they pay the ransom and get back up and running quickly. In the worst case situation, even after paying, the hackers refuse to return the company’s data to them.
“This has to be taken seriously,” Arora said, and that’s why the market is big enough for many cybersecurity companies to be successful.