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Levi Strauss & Co, the maker of Levi’s jeans, kicked off the IPO frenzy by going public and making investors a lot of money, but the stock is now too high to buy, CNBC’s Jim Cramer said Thursday.
Shares of the jean company, which was founded in antebellum America, rocketed more than 30 percent during the session after listing at $17, as much as $3 higher than its expected offering. The stock closed at $22.41 in its return to public markets after spending more than three decades as a private company.
The “Mad Money” host noted that it’s a high-quality brand, which includes Dockers and Denizen under its belt, and CEO Chip Bergh has turned the company around since taking over in 2011. But he warned that investors should not buy into the iconic name at just any price because there is no guarantee that Levi’s will keep delivering rapid earnings growth.
This is an apparel stock and it’s important to do security analysis, Cramer said.
“Levi’s has been doing a great job in a tough business, but at the end of the day, I hate to chase a stock that’s up big, and this one’s already up enormously after its first day of trading,” he said. “As much as I like Levi’s the business … Levi’s the stock is too rich for me at these levels.”
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Investors need not worry that the Federal Reserve induced a market “sea change” by calling off interest rate increases this year and adjust their game plan to make money, Cramer said.
The major averages all rose higher during the session on the agency’s monetary policy reversal, he said.
“This is a dramatic shift—we don’t need to worry about more rate hikes—and that’s why it’s causing a sea change in the stock market right now because we’re in a low growth environment again,” the host said.
Although Chairman Jerome Powell and the central bank reduced the forecast on GDP growth and inflation, there are more stocks that can perform well in low-growth rather than high-growth conditions, he added.
As a guideline, Cramer suggests picking stocks whose sales won’t get knocked down by an easing economy, focusing on high-yielding dividend stocks, buying the fastest-growing names while inflation is near flat, and loading up on companies that do a lot of business overseas, including those impacted by the trade war with China, because the dollar is getting weaker.
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The health care industry has reached $3.5 trillion and is “growing at an unsustainable rate,” CVS CEO Larry Merlo told Cramer. The chief pointed out an estimated quarter of health care spending is wasteful and reducible and his company, in collaboration with Aetna, has a plan to reduce costs and boost the company’s earnings.
“Percentage points are going to matter here,” he said. “Being able to reduce those unnecessary costs, you know, the value created is going to start with a ‘b’ as in billion. That’s the opportunity that’s in front of us.”
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Cramer said tech is once again leading the market and the sector has even more importance now that it’s stuck between the bulls’ praising of the Federal Reserve’s monetary policy and the bears’ warning of the trade war with China.
The host said that three tech names that could be ready soar, according to his TheStreet.com colleague and Explosive Options founder Bob Lang’s interpretation of the charts.
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Apple is becoming more and more ingrained in people’s day-to-day lives and its customers can’t get enough of its must-have services. Cramer suggested that this is a name to own and not trade, even if the stock drops.
Ahead of its much-anticipated TV announcement, the host explained how the iPhone maker can avoid a “serious beat down” next week.
“Simple, the company needs to care about more than handsets, and its investors need to do the same,” he said. “This is the Apple that, at last, ignores what Wall Street tech analysts want—more iPhone sales—talks about how customer satisfaction, how ubiquity, how indispensability will create greater sales for the service businesses over time.”
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In Cramer’s lightning round, the “Mad Money” host ran through his thoughts about callers’ stock picks:
Whitestone REIT: “Small real estate investment trust and retail in there., I don’t trust these ones that yield more than … 9 [percent]. That’s too high. Something may be wrong. I don’t want to touch it.”
Microsoft Corp.: “Isn’t it unbelievable? Look, [CEO] Satya Nadella he’s doing a good job—won’t come on the show, hurts my feelings, that’s O.K. … But here’s the problem: Microsoft has been straight up. I am not going to tell someone to buy it right here. Let’s wait for a pullback…”
Centene Corp.: “It’s been down in the dumps. It’s gotten away from … it’s out of fashion on the Wall Street fashion show, what can I say? Michael Neidorff’s doing a great job. Right now these stocks are bad. They always come back, they do. I mean take a look at the chart. I’m banking with Neidorff right here, right now.”
Disclosure: Cramer’s charitable trust owns shares of Apple and CVS.
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