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There has been a paradigm shift in the weed industry, Jim Cramer says

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There has been a paradigm shift in the budding marijuana industry and it has affected how Wall Street trades in the space, CNBC’s Jim Cramer said Thursday.

Pot stocks caught fire last year between Canada’s legalization of recreational weed and the United State’s legalization of hemp in the 2018 Farm Bill. But Cramer says shareholders set expectations too high. The sector has experienced two dramatic sell-offs within the past nine months, during the fourth-quarter meltdown and again in the recent earnings cycle.

MJ, the ETFMG Alternative Harvest ETF which tracks stocks of legal cannabis businesses, deflated 49% from its September high to its December low and cooled off 17% between its April high and June low.

A number of CEOs made bold forecasts for their companies, but recent earnings in the space show the Canadian market will be a “dogfight,” Cramer said. Even Canopy Growth, a Cramer-favorite and one of the few he currently recommends, revealed its operating costs are growing faster than sales, which led to the ouster of founder Bruce Linton as co-CEO last week.

“This is why I told you to be wary of some of the wilder promises made by marijuana executives, even though I’m a big believer in the long-term thesis …” the “Mad Money” host said. “As the weak hands exit the cannabis space, investors are starting to care about the actual results, for once.”

Recreational use of marijuana is now legal in 11 states across the country. Colorado, the first state to end prohibition in 2014, said last month it crossed the $1 billion mark in total cannabis-related revenue. Investors are banking on the U.S. federal government to drop marijuana as a Schedule I of the Controlled Substances Act. The House Judiciary Committee held a Wednesday hearing on decriminalization the plant, but Cramer said don’t count on it being legalized, at least “not with this Congress.”

Furthermore, stores offering products with cannabidiol — CBD, a legal derivative of cannabis — are opening across the country, but they are not yielding returns that traders were hoping for, he said. The Federal Drug Administration has not created regulations for CBD to be added to food products, which has left packaged food companies on the sidelines, he continued.

Last month, Brinks CEO Douglas Pertz told Cramer that the cannabis business is “probably $160 billion on a global basis.”

“Without the promise of legalization here in the U.S., you have to make decisions on the cannabis stocks based on the numbers, no longer optimistic promises,” Cramer said Thursday. “And the actual numbers are complicated, to put it diplomatically.”

With that in mind, the host told viewers to be even more selective with their pot stock picks and pay attention to how products of the underlying equity are selling. He still recommends Canopy, backed by a $4 billion investment from Constellation Brands, as best of breed in the sector, but there are others also worth buying into weakness such as Cronos, which is backed by a $1.8 billion investment from Altria.

All other pure marijuana plays, including Aphria and Tilray, should be approached with more skepticism, Cramer said. Avoid the cannabis ETFs “because you end up owning the good with the bad,” he added.

Global financial services firm Morningstar recently initiated coverage on six weed stocks.

Cramer also thinks Innovative Industrial Properties, a cannabis real estate trust, and GW Pharmaceutical, which makes drugs with synthetic CBD and tries to separate itself from the marijuana industry, can both be bought on a pullback.

“I think the group may have to do some cooling off, but as the pot stocks settle, you can buy the likes of Canopy and Cronos into weakness,” Cramer said. “Just understand that the paradigm has now shifted and is much more rigorous for the entire industry.”



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It is shaping up to be a good week for earnings

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CNBC’s Jim Cramer said Friday that he wants to read the fine print before he turns positive about President Donald Trump’s claim that U.S. and China trade negotiators reached a “phase one” deal.

Investors responded positively to the news. The three major U.S. stock averages all rose more than 1% by the session close. The major indexes finished the week higher, with the Dow Jones Industrial Average and S&P 500 breaking three-week losing streaks.

China agreed to as much as $50 billion in agricultural buys and some intellectual property concessions, according to Trump. In exchange, the U.S. canceled a tariff hike that was to go into effect next week.

The preliminary deal, however, has yet to be signed, and officials are expected to get to work on phase two right away.

“With this latest news on trade today, next week is still going to be about China, but not as much, I think. A trade deal … means we can finally focus on the substance of earnings, and I like that. I’m expecting many of these quarters could be better than expected,” the “Mad Money” host said. “[This] could be a good week, as long as Washington doesn’t get in the way.”

Monday: Brexit update?

The stock market will open for regular trading hours, but the bond market will not for Columbus Day. Across the pond, British lawmakers continue to work on a long-debated Brexit deal that would make way for the United Kingdom to leave the European Union.

“At this point, any deal is going to be treated as good news because it will finally put an end to the cloud of uncertainty that has been hanging over Europe literally for years now,” Cramer said.

Tuesday: J.P. Morgan, Citigroup, Goldman Sachs, Wells Fargo, United Health, Johnson & Johnson, Workday

The major banks are scheduled to report quarterly earnings.

J.P. Morgan Chase‘s numbers come out in the morning and Cramer expects to hear about loan demand and see a dividend boost.

Citigroup‘s third-quarter results will also be released in the morning. The host wants to find out how much stock the bank bought back.

Goldman Sachs reports earnings from the quarter ending in September. Apple partnered with the bank on the Apple Card that launched in August and Cramer anticipates getting insight into the credit card’s early reception.

Wells Fargo delivers quarterly results in the morning. After a long search, the financial institution has found a replacement in Visa and Bank of America veteran Charlie Scharf to lead the bank past its scandals.

“The banks had a monster move today, which makes them harder to recommend going into the earnings. The pattern here is that we tend to get profit-taking after the initial excitement … [and] I do not expect anything different” this time, Cramer said.

Beyond the big bank reports, Cramer is keeping his eye on Johnson & Johnson, whose earnings story he said has turned into a “legal story,” and United Health. The host is also interested in cloud-based payroll Workday‘s analyst meeting.

Wednesday: Bank of America, IBM, Netflix

Bank of America reports results from the September quarter in the morning. The stock traded within the $24 and $31 range all year, despite posting strong numbers in the last two quarters.

“I bet Bank of America can break out of this trading range if JP Morgan reports a good number the day before. That is the best analog,” Cramer said.

IBM reports after the closing bell and is expected to record $18.2 billion sales and $2.67 earnings per share in its third quarter, according to FactSet.

“We need to know how Red Hat’s doing,” the host said. “Without specifics, the stock will continue to languish.”

Netflix reports earnings and shareholders are looking to hear a more positive story about subscriber growth as streaming competition heats up, Cramer said. At one point this year, the stock climbed more than 43% to $385.03 in May but tumbled below $255 last month as companies announced their plans to enter the space that Netflix has dominated for years. Shares closed Friday’s session at $282.93.

“If they deliver a better-than-expected sign-up number, the stock could rally 50 points,” Cramer said.

Thursday: Honeywell, Union Pacific

Honeywell plans to release quarterly results prior to the morning bell. Wall Street is looking for the manufacturer to produce $9.1 billion in revenue, about 15% shorter than the year prior, and an EPS of $2.01, according to FactSet.

“Honeywell’s been on a tear. It’s one of the best performers in the group,” Cramer said. “Its aerospace business has been a standout. I’d start worrying: Could Boeing be hurting it?”

Union Pacific will also deliver an earnings report before the market opens. Cramer expects the freight-hauling railroad to have a shaky quarter. Analysts expect sales to slide 4% to about $5.69 billion and earnings to grow nearly 8% to $2.32 per share, FactSet said.

Morgan Stanley reports earnings in the morning.

“I think you can buy this stock ahead — maybe on Monday or Tuesday — of when they report numbers because I expect a good quarter,” Cramer said.

Friday: Schlumberger, Coca-Cola, American Express

Cramer said he is expecting good reports from both Coca-Cola and American Express.

Schlumberger reports results prior to the open. The oil stock is down nearly 10% year-to-date and analysts expect little growth in the quarter for $8.5 billion in sales.

“We still own some Schlumberger for my charitable trust…,” Cramer said. “We sold some for a loss. We should have sold it all.”

Disclosure: Cramer’s charitable trust owns shares of Goldman Sachs, Apple, JPMorgan, Citigroup, Honeywell, Schlumberger, and UnitedHealth.

Disclaimer

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Jim Cramer’s ‘Mad Money’ recap & stock picks Oct. 4, 2019

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CNBC’s Jim Cramer gives viewers a preview of his schedule for the week ahead, with a few earnings reports and U.S.-China trade news taking center focus. The “Mad Money” host gave investors his blessing to start a position in Clorox and buy shares incrementally, but warns not to expect the stock price to rebound in the near-term. He sits down with Stitch Fix CEO Katrina Lake to understand how tariffs on Chinese imports have affected the web-based fashion retailer and, later in the show, dives into the state of real estate investment trusts and reveals some buying opportunities.

Cramer’s game plan for the trading week of Oct. 7

Earnings season is underway, but it’s in the “slow dribble phase,” CNBC’s Jim Cramer said Friday.

The “Mad Money” host has just three earnings reports circled on his calendar in the week ahead, along with two analyst meetings he will tune into.

He warned that the stock market has a number of headwinds coming out of Washington, D.C., to deal with, including the U.S.-China trade war, and a trade agreement with Canada and Mexico that would replace NAFTA and the Federal Reserve.

Trade officials are scheduled to resume talks later in the week, and the Chinese economy is one major focus of the host’s game plan for the trading week of Oct. 7.

“The week after next will be insane,” Cramer said. “Better batten down the hatches and get ready for companies to adjust their numbers going into a new round of tariffs that … they’re most likely unprepared for.”

Clorox gets a clean slate

Benno Dorer, CEO, Clorox

Scott Mlyn | CNBC

Cramer is bullish about Clorox’s prospects, despite the downbeat forecast that management offered in an analyst meeting earlier this week.

Clorox revealed at the Tuesday event that it cut earnings and sales estimates for the 2020 fiscal year, but the “Mad Money” host thinks the share price is on its way higher because it’s a stock that can work in a volatile market.

“In spite of that unexpectedly downbeat analyst day, I think this is the time to start buying Clorox. Although I wouldn’t buy it all at once,” Cramer said, framing the meeting as “a cleansing moment where management resets expectations … by getting all the potential negatives out in front of you.”

Mitigating another tariff hike

Katrina Lake, CEO of Stitch Fix

Adam Jeffery | CNBC

Stitch Fix has been able to avoid being affected by the trade dispute between the United States and China, but the online styling service may face some headwinds in the future.

President Donald Trump has had duties in place on billions of dollars worth of Chinese imports, many for more than a year, and more are expected to go into effect on Dec. 15.

“Tariffs that we’ve had to date don’t impact us,” Stitch Fix CEO Katrina Lake told Cramer in an interview. “The ones that are being contemplated now potentially could.”

What’s hot and what’s not in real estate investment trusts

Pedestrians walk past commercial real estate in Manhattan.

Michael Nagle | Bloomberg | Getty Images

Shares of a various of real estate investment trust have been rallying, but Cramer cautioned that investors must take care in the picks they get behind.

“You have to be careful to avoid the pitfalls because some of these names, like the mall owners, are total houses of pain,” he said. “As for the biggest winners, they’re trading more like growth stocks than REITs, which, by the way, is fine by me.”

Cramer’s lightning round

In Cramer’s lightning round, the “Mad Money” host gives callers his thoughts about their favorite stock picks in rapid speed.

Nike: “I think it goes higher, why? Because they had one of the best quarters that I have seen in ages. And my congratulations to [CEO] Mark Parker, who will not come on this show and it’s beginning to really break my heart.”

Huami Corp.: “There’s only one device company in the whole wide world that’s worth owning and that is Apple. So, even though I know your stock is very low dollar amount, Apple is a better buy.”

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
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‘We need some more downside’ on the market

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The stock market got hit with a double whammy on Friday coming from a glut of new public offerings and a threat from the White House to limit U.S. investments in China, CNBC’s Jim Cramer said.

The “Mad Money” host said “busted deals” such as Peloton, SmileDirectClub, Lyft and Uber are happening too often and have contributed to a number of down days on Wall Street.

In the midst of an ongoing trade war between the world’s largest economies, the public also learned during the day that Trump administration officials are looking at ways to deter U.S. companies from investing in Chinese companies, a move that Cramer supports.

“Turns out … it’s not as sweeping or as negative as the market seems to believe,” he said. “The administration doesn’t want Chinese listings that lack the same kind of transparency as American companies, and it would prefer investors not to buy the shares of companies with opaque financials.”

The Dow Jones Industrial Average lost more than 70 points, or 0.26%, while the S&P 500 pulled back 0.53% and the Nasdaq Composite dropped 1.13%.

“I know it’s been rough, but last week this market was really overbought still, and when you’re overbought you tend to get hit with sell-offs … especially when we’re being flooded with shoddy IPO merchandise,” Cramer said. “I think we need some more downside before I’m really ready to get more positive.”

Cramer also gave his game plan for next week:

Monday: Thor Industries

Thor Industries reports earnings before the market opens. Shares of the recreational vehicles manufacturer have struggled as of late, down nearly 70% from their January 2018 all-time highs on the back of a series of earnings misses. Cramer noted that labor and raw costs, on top of dim demand, have contributed to woes in the camping cohort.

“If there’s ever going to be an upside surprise here, it’s going to be this quarter, because interest rates are finally going down. For now, though, I think it’s way too risky,” he said. “Thor needs to deliver at least one quarter, please, of good numbers before you have my permission to circle back.”

Tuesday: McCormick, Stitch Fix

McCormick presents quarterly numbers before the opening bell. Analysts are looking for a profit of $1.29 per share on $1.3 billion revenue in the Cramer-fave spice maker. The stock dropped more than 2% in Friday’s session.

“If it keeps falling on Monday … you’re going to get a good opportunity to buy this thing,” he said. “McCormick is one of the few companies in the supermarket that’s got real growth.”

Stitch Fix has an earnings call after the closing bell. Wall Street expects 4 cents earnings per share and $432 million of sales, which would represent nearly 37% year-over-year growth. Shares are down more than 42% since late June.

“Expensive valuation never seemed to matter to the stock until June,” Cramer said. “That’s what happens, though, when you go out of style on the Wall Street fashion show. Watch how this one behaves after the quarter.”

Wednesday: Lennar, Bed Bath & Beyond

Lennar delivers a quarterly report in the morning. Housing has been a strong spot in the economy, and shares of the homebuilder have been steadily growing, closing Friday’s session shy of 40% year to date.

“Housing’s responding to lower interest rates,” Cramer said, “so if this stock gets hit on the quarter, call me a buyer.”

Bed Bath & Beyond‘s earnings report comes after the market closes. The company has been shaken up by activist investors looking to stabilize sales and cut costs at the home goods retailer. The stock is at $9.91, more than $2 higher than its August lows.

“Bed Bath finally looks like it’s kind of [bottoming],” Cramer said. “Let’s hear what they have to say before you try to pick at this one, though.”

Thursday: PepsiCo, Constellation Brands, Costco

PepsiCo reports earnings in the morning. The stock is up more than $11 from early August.

“I think Pepsico is exactly what works in this dicey environment,” Cramer said. “I’m looking for 5% organic growth.”

Constellation Brands has a quarterly call before the bell.

“Constellation might help us understand its cannabis strategy … not to mention, please, have something to say about spiked seltzer, which is the hottest part of the alcohol market,” he said.

Costco delivers earnings after trading ends. The stock has fallen about $17 in three weeks.

“I expect one more leg down before the stock’s safe to buy,” the host said.

Friday: September jobs report

“Employment’s been strong, but now everyone I know is acting like the good times stopped rolling,” Cramer said. “I don’t think that’s the case. I expect another good number, which may make it difficult for the Fed to give us another rate cut.”

WATCH: Cramer’s game plan

Disclosure: Cramer’s charitable trust owns shares of PepsiCo.

Disclaimer

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
Mad Money TwitterJim Cramer TwitterFacebookInstagram

Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com



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