Some of the data center stocks are buying huge amounts of stock in the open markets, says Jim Cramer
Speakers
Jim Cramer
— Host, Mad Money
Summary
Jim Cramer argues that the memory and data storage stocks tied to the data center buildout may not be finished running despite huge gains, because demand is tight, long-term agreements lock in margins, and several companies are returning cash via buybacks. He discusses Micron as his specific growth pick and fields caller questions on Honeywell, Vertiv, Microsoft, and Abbott Labs.
- Cramer highlights massive YTD gains in SanDisk, Seagate, Micron, and Western Digital.
- He says data center memory demand, shortages, and long-term supply agreements have changed the industry from cyclical to secular.
- He notes SanDisk, Seagate, and Western Digital are doing large open-market buybacks while Micron is not.
- Cramer says the Investing Club bought Micron for the Travel Trust and thinks it can still double.
- He sees Cisco's weak guidance reaction as a buying opportunity.
- He gives positive views on Vertiv's order book, Microsoft's excellent quarter, and Abbott's cheap valuation.
- For Honeywell, he owns it and would buy on a downgrade-driven drop to $220.
Ideas
Own memory stocks on data-center demand
SanDisk, Seagate, and Western Digital are using large buybacks to return cash to shareholders instead of overbuilding capacity. Cramer says these three have less risk than Micron because of that shareholder return, with SanDisk at $15.5 billion, Seagate at $5 billion, and Western Digital at $4 billion in repurchase authorizations.
Own memory stocks on data-center demand
Cramer argues the data center buildout has changed memory and storage from a boom-bust cyclical business into a secular growth story. Memory is the key bottleneck, the manufacturers are not overbuilding, and long-term agreements lock in huge gross margins for years, so these stocks may not be done rising despite huge YTD gains.
Buy Cisco on weak guidance negativity
Cramer views the negative reaction to Cisco's weaker guidance as a buying opportunity rather than a reason to avoid the stock, and says he would buy Cisco right here because of that negativity.
Buy Honeywell at $220 on downgrade
Cramer says Honeywell Aerospace was a disaster and blames management, but the core Honeywell business under Vimal Kapoor is doing a good job. He owns the stock and says if another downgrade sends it to $220, that is when he would tell investors to buy it.
Vertiv order book supports strong year
Cramer thinks Vertiv is going to have a very, very strong year and says its order book is incredibly solid, so he supports adding to the position.
Microsoft longer-term strong after excellent quarter
Cramer says short-term traders can take Microsoft profits because the stock spiked and he dislikes parabolic moves, but longer term the quarter was so excellent that he changed from a soft supporter to a stronger supporter; he credits Satya Nadella and Amy Hood for superb execution.
Abbott is cheap at 20 times earnings
Cramer disagrees with concerns about Abbott's acquisition, says Abbott is good, and at only 20x earnings it is still too cheap for Abbott. He would hold the stock.
