Transcripts For CNBC Mad Money 20160719

Nasdaq declining. We have entered the heart of earnings season. These moment where is the reports are fast and furious with the headlights blaring and free markets all over the place are among the most challenging times for all investors. What makes dealing with this cacophony of earnings so tough . Its subjective. I view the companies as being similar to the way teachers grade tests. We do have the occasional true or false quiz, sometimes multiple choice and the essay. The subjective essay that needs to be read beginning to end. You want to figure out how well the company did. While you often hear that such and such a Company Reported a good quarter i reserve judgment based on the kind of test being administered. Sometimes the answer is obvious. Johnson johnson delivered a monster quarter with a terrific top and bottom line beat. As stellar sales of all the new drugs stole the show. It was unassailable. Therefore, j js quarter was a true or false test. Im checking true to the line that says j j was fabulous. [ cheers and applause ] netflix on the other hand, reported a flop of a quarter. Boo with a big miss in subscriber growth as those who were grandfathered in with the price break reacted negatively when the price break came to an end or ungrandfathering as they called it on the call. Netflix isnt a true or false pop quiz. It is the answer to a multiple choice query about which company has had the worst quarter so far this earnings season. How about ibm . This is a paper that needs parsing. Ibm is subjective. It depends on who is doing the grading. I went through the quarter and i liked the growth in the proprietary cloud and cognitive data that involve watson. You have seen watson on tv. That business is becoming a larger portion of the company. At more than 30 billion in revenues it represents 38 of ibm total sales. I find that encouraging. However then you listen to the incredibly rigorous analyst at Sanford Bernstein who says ibms businesses are decelerating. So theyre going to be hardpressed to make estimates in the second half of the year. He thinks the company took a step back, not forward in the latest quarter and makes a compelling case to stay negative on the name. Sell, sell, sell. Given that ibm stock had run up i think the balance of evidence went to tony. An upside surprise turned into a stock that was big in after hours but actually fell 28 cents today in the wake of tonys prediction of the upcoming short fall. I thought b plus. Tony flunked it. Goldman sachs which completely clobbered estimates, company earning 3. 72. Wall street was looking for 3 flat. The problem is goldman went from 144 to 163 ahead of the quarter. In keeping with a much better numbers that we saw from jpmorgan, citigroup, bank of america. The quarter was good but still not good enough. Especially with the controlling of expenses which i regard as marvelous but the street didnt. I swear it was the quarter but goldman deserved an a in my eyes. It was graded on a bell curve and the a went to jpmorgan. Goldman sachs had a c. How can you tell the test you are being given and what can you do to maximize your gains while minimizing risk . First when a stock is run up the important thing to remember is there are people who are only in it for the quarter and they are going to blow out of the stock no matter what. Simply as a matter of discipline. When traders have a big gain they will take it, even if they end up selling before the actual test results come in. Second, there are people who are more powerful than the company itself in determining the stock reaction to earnings. Tonys name meant nothing to you but hes as important as ibms ceo who runs the call. If saganaki says they cant make the numbers or the business isnt transforming the way management says it is his voice takes precedence. Why . Hes what we call the ax. As demonstrated by his excellent appearance on the Halftime Report with scott wapner where he explained his critical and negative reasoning. Third lesson, this is a relative gain, people. Goldman sachs may report a good quarter in absolute terms but the quarter wasnt as good as jpmorgan. Yet the stocks are run a commensurate amount. To say goldman did as well as citigroup is crazy. But so little is expected from citi and so much is expected from Goldman Sachs. Right now the citigroup is the guy bo buy given how far its come but i dont believe Goldman Sachs is bad. Its not quite good enough. In a vacuum goldman will be soaring toward the book value but the grading is subjective and the teacher is over looking that objective fact. Citigroup is still a buy even though its up only a couple of bucks. Fourth, when its bad, its really bad. More than one day bad. Like netflix. When you see a stock down this hard you have to belief there are multiple institutions trying to get out and they cant dump everything in one day. They own too much stock. There werent enough downgrades and number cuts netflix may not be able to sustain these lower prices. When its good there are no price people wont pay. Johnson johnsons earnings were that type of good. Now you have to wait for the next brexit type of event before you can buy it at a discount though its up more than 20 points. Heres the bottom line. At this point in earnings season the markets in nonstop grading mode and you understand how this process works. You have a much easier time of it. Its always best to seek out the true or false and multiple choice test. They are much easier and much more lucrative ways to both trade and invest. Bud in ohio. Bud. Caller booyah, ski daddy this is your long time bud in beautiful akron, ohio. We love it there. Whats going on . Caller i was hoping you could help me manage a winning trade. I recall a feature a couple of weeks ago on companies that will benefit from political tv yes. Caller on the tuesday after the brexit freakout, i asked myself your favorite question. What the heck does brexit have to do with the price to earnings ratio of gray tv. It fell 8 from where you featured it. I bought some in the money november calls which captured the next two Earnings Reports. Im already in the black on this trade. I wonder if you could give me any suggestions on how best to manage it . Let it ride. Actually you did the calls and thats fine. Hold on to it. The people wont realize the great numbers until they see them. Thats when you can [ bell ringing ] well played. Isaac in new york. Isaac. Caller thanks, jim. Im calling about a stock you might be familiar with called bristolmyers. Bristolmyers yeah. Caller all right. I didnt say it the right way. I have two quick questions. One is its had a runup for the last two months. What would be considered a good entry point and second, all this political talk about price controls, does that concern you and should that make me hesitant to buy the stock . Okay. My next buy point for bristolmyers is during the Democratic Convention where im sure someone will bash drug companies. That may be your chance to pull the trigger. Otherwise its been in the bullpen waiting for it to come down. Youre right. It doesnt seem to want to budge. All right. You cant always grade stocks on a passfail basis. Get out the red pen and well Grade Companies this earnings season together. Find out the value di valedictorians. There is serious cash being spent in the animal kingdom. Sit, stay. Im eyeing what can help you make money. Has bro and netflix, two big stocks, two big declines. Which should you buy . And three weeks ago the worst twoday selloff in years. It may be gone but is it forgotten . Im tackling the techs to see if the recent rally is real. Stick with cramer. Announcer dont miss a second of mad money. Follow jimcramer on twitter. Have a question . Tweet cramer, madtweets. Send jim an email to madmoney cnbc. Com or give us a call at 1800743cnbc. Miss something . Head to madmoney. Cnbc. Com. Discover how a lexus master craftsman turns an ordinary experience into an extraordinary one. Get great offers at the lexus golden opportunity sales event. Lease the 2016 es 350 for 329 a month for 36 months and well make your first months payment. See your lexus dealer. On a relatively hohum day like today as the market is barely moving as it tries to digest the last few weeks of Monster Games i look to like for themes to help you make money for years to come. Use these as teaching days. Powerful, longterm trends and the stocks that allow you to profit off of them when the market drops back. Let me give you a perfect example. Right now one of the hottest themes out there is the sheer amount of money you and i spend on our pets. This shouldnt come as a surprise to regular viewers given that i pounded the table on the pet theme before. But the story has so much staying power i think it is worth going over it again with new companies. These days Many Americans treat cats and dogs less like animals and more like family members. We pay up to buy them the best, most organic food. Okay, well, some people pay up. Perhaps more absurd, we spend fortunes so our pets get the best medical care money can buy. Your average cat or dog might be Getting Better health care than people in less developed countries. What can i say . We love our animals. When you see an animated movie like the secret life of pets grossing more than 200 million in less than two weeks beating out the new ghostbusters remake this weekend, you know the pet care theme is multi generational so it could be a moneymaker for a very long time. Before we get into specific stocks let me give you some aggregate numbers so you can understand the scale of the opportunity. According to an Industry Trade group called the American Pet Products association, pet related spending in the u. S. Has exploded since the turn of the millennium. In 2001 americans spent 28. 5 billion dollars on pets. By 2015, that figure had more than doubled to 60. 3 billion. Overall pet spending should continue to grow at a 4. 1 clip this year. Much stronger than the gdp, housing starts, whatever number you throw at me. Roughly 65 of all u. S. Households own a pet up from 56 when apa started the survey in 1988. We have 86 million pet cats in this country. Nearly 78 million dogs not to mention 14 million birds, 9 million reptiles, 12 million various small animals and 7. 5 million horses. Aside from low maintenance freshwater fish, like goldfish, cats and dogs are the most popular pets out there. As i can tell you from personal experience it is expensive. Every year the average dog owner spends 551 on surgical visits and the average cat owner nearly 400 and they hate to go. Routine checkups cost 196 for a cat. Food costs hundreds of dollars a year and thats if you stop yourself from buying the good stuff. If you want to go on vacation, cant find someone to dog or cat sit, you have to shell out hundreds of dollars for boarding. We spend a lot of money on kennels. Put it together and there are a lot of ways to make money from this smoking hot pet care theme. Tonight i will cover one group. Its the Veterinary Care pet supplies and medicine space which all together accounts for half of petrelated spending. Well talk about pet food later this week. For now let me give you a rundown on the animal pet stocks starting with the maker of medicine, vaccines and tests for pets and livestocks like Companion Animals and commercial, the largest pet Health Company out there. Zts spun off by pfizer in early 2013. The stock had a lack luster first year but rallied in 2013, 11 in 2015 and is up 3 year to date. Including a very good Companion Animal sales line and they are inventive coming up with new medicines. Next up, cramer fave idexx labs. This is the maker of veterinary testing equipment, the worlds leader in diagnostic tools for animals. Idexx has been a tremendous winner going back to the financial crisis. Look at the chart. Stock keeps roaring year after year including a 20 plus gain in 2016. The Company Continues to churn out solid results. It is riding the pet theme. Most recently they reported a nice beat and raise quarter in april. It made good money if you bought the stock when john ayers appeared after the brexit thing. Of course pets had nothing to do with brexit but the stocks fell anyway. Third, vca, Victor Charlie anthony. Thats the aptly tickered woof originally short for Veterinary Centers of america, it runs 680 small animal vet hospitals in the u. S. And canada. They have their own nationwide clinical lab system called antech diagnostics. Vca benefits as people spend more on keeping pets healthy and ensuring they live longer. The stock is up 225 since the end of 2012. Including terrific little better than 24 gain this year alone. Thats when everyone is starting to get this thesis. En finally, pet med express or 800petmeds, americas largest pet pharmacy on it are as online and on the phone. Its up 14 for 2016 but i would rather have the drug maker than the pharmacist. Which of the plays are most enticin enticing . Whats the best way to play the pet care theme . I have to tell you. While idexx is a favorite in the space for some time, the stock is pricey, trading at 38 times next years earnings estimate. I like to buy edexx more on a pullback. Hmm. Okay. How about zoatis. The company shocked people last year im shaking because it looks like we have other forms of pets here. Oh, this is one of those thats booyah. Booyah is floating upside down at the top of the oh, no. Its phew. Holy cow. This is a much more inexpensive, Less Health Care oriented animal that i like, too. You dont have to get insurance on it. The company shocked people year over years declined reporting in february and shocked again with a bullish upside surprise. Booyah, thats the name of the fish. Baby booyah. What company do i work at that i dont know this . Its a staff pet. The pet named by me but i wasnt aware of it. By you, cramerica. You named it its cable access. Sometimes we get it wrong. When we do pet stuff my staff finds it hard to control themselves. Its almost pawfect. Ha [ rim shot ] i say if zts delivered a second robust quarter in a row when we hear from them august second thats worth buying. I like ceo juan ramon. Maybe pick up some now and then some after the report. Zts. That leads us to vca, the chain of animal hospitals. This is a stock that continues to outperform the competition. Its still trading a bit over 21 times next years earnings estimates. Not that expensive when you consider that vca is experiencing accelerated Revenue Growth or arg of late. I like vca. I was going to do a big piece about that but i wanted to keep zts and idexx in front of you. There are a ton of ways to play pet care. Tonight we scratched the surface with veterinary. If you want to benefit, own vca, maybe some zts now and after the quarter we are certainly buying idexx into the next pullback. Booyah. See . Its down there like a treasure. Much more mad money. Baby much more mad money ahead. Hasbro and netflix are in the business of entertaining but the stocks are anything but a barrel of fun. I will tell you if they are worth owning. This markets been enduring whipsaw volatility. Could we be settling in for a rally or is there more instability ahead . Ill go off the charts to find out. And im eyeing one of the biggest breakups of the year and its not taylor swift and calvin harris. This one is a more lucrative split. I suggest you stick with baby booyah blue booyah, whatever. Stick with cramer. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. What do you do with the misfits of earnings season . Companies that blew it and saw their stocks crushed . Like hasbro yesterday and netflix today. Can you buy either one . Buy, buy, buy. [ buzzer ] we had the toy ceo on last night and i found his explanations for the decline in hasbros stock to be compelling. Inventories were up more than 40 and the chatter was how it must be sitting on old star wars merchandise because they said sales were flat but brian said a great deal of that inventory buildup is for toys that arent released yet. This is how he put it. Inventories were up because we are ready to launch a third and Fourth Quarter business on Disney Princess and frozen. Its a great business for us this year. It will be bigger in the second half of the year. That accounts for a lot of the incremental inventories. How can that be bad inventory . To me it looks like good inventory ready for a big holiday season, one you want to get in on. Its true Jurassic Park is leaving and transformers was weak. I heard a lot away from that theme that i liked. And wasnt talked about enough on the call or in the media following the report. Plus, if you are selling the stock now, youre doing it ahead of a full movie roster including a new Star Wars Film this december that could help the company move a lot of merchandise. Throw in the fact that hasbro has a 40 million buyback and i would be a buyer. Not a seller of the stock of hasbro. I would buy it right here. I think this is simply a case where the stock had run up more than 25 running into the quarter and a slowing in the category spooked people. Im not in denial about the weakness. I believe it is transitory and the stock represents great value. Perhaps more important, look back at when mattel reported. It was a total miss by the keystone barbie franchise. Mattel is above where it was reporting the weak quarter and nowhere near the number of catalysts hasbro enjoys. I think you can buy, buy, buy. Hasbro. How about knicnetflix . Im baffled with the ungrandfathering thing. What are you seeing with the ungrandfathering members is they have different pricing options. In terms of the ungrandfathering issue where are you in the u. S. It didnt face a grandfather choice. Ungrandfathering. Ungrandfather. Ungrandfathering. Im wary of words spellcheck wont check off on. It dominated everything on the call last night. As price increases were about to hit longtime subscribers who were grandfathered at a lower price, they didnt reup. Price mattered. In other words it seems like fewer of a pending price increase made netflixs u. S. Numbers weak. I found myself thinking at least they didnt lose any from ungrandfathering. The price never mattered before this. Netflix is part of the holy trinity of memberships. People will pay more for costco. They jack it up. Do i care . No. Pay, pay, pay. Amazon prime . I would pay 50 more. Netflix . No longer the case. We dont know why these people decided not to reup. In the enough talent, movie, production . Why . It didnt seem like netflix knew either. Im baffled about this. Cant figure out why they arent reupping. Its not much money versus how much the cable bill is going up. I didnt get the last miss either when netflix blamed australia. I didnt get it when they said there was an issue with credit cards but i overlooked each one because i knew people pay for netflix. Now im not sure. You shouldnt get this level of netflixcutting and the lack of domestic growth isnt made up overseas like it was. In short this is the classic bad quarter that cant be bought. Yes, netflix maintained the guidance for next year but after three straight quarters of misses you cant get in front of it. I like this but you cant. Until we get through the ungrandfathering which wont stop until the end of the year. The bottom line on netflix is i finished that Conference Call dazed and confused. If you werent dazed and confused, too, you obviously werent on the netflix Conference Call. You were on a different call from a Different Company or perhaps listening to an older call when the idea that someone wouldnt pay up for netflix was inconceivable. Not anymore. Jim in georgia. Jim. Caller hey, cramer. Wonderful show. Thank you. Caller question for you. Given yesterday sub par Fourth Quarter report what caused the 5 up spike in calmaine only to watch it go down today for a tenpoint swing. A viewer asked about stamps. Com yesterday. These are stocks that have a very heavy short position. A lot of the analysts come out and make big calls and the stocks get whipped around. Its why when i see a big short position i get nervous about telling you to like a stock even though there are short bashers out there saying this is the chance to pull the trigger. Hasbro and netflix. Two more perfect examples grading stocks during earning seasons requires more than a true or false test. It reveals opportunities like hasbro in worrisome situations like netflix. Much more mad money ahead. Are worries about brexit a thing of the past . I will go to the charts to see if the roller coaster action can continue and my take ton the breakup to end all breakups that went into effect two weeks ago. Its not all a bad romance. How this can make you money. And all your calls rapid fire in tonights edition of the lightning round. So stick with cramer. [announcer] is it a force of nature . Or a sales event . The summer of audi sales event is here. Get up to a 5,000 bonus on select audi models. Three weeks ago this market had just experienced its worst twoday selloff in years. Given the tremendous run since then its almost hard to remember how terrified people were in the immediate aftermath of great britains vote to leave the e. U. Those three short weeks almost feel like a lifetime ago, dont they . Back then after the brexit blowup the panic all you could say is it was palpable. You could see investors fleeing stocks in droves and not just in the british market or even the european stocks where it made sense to be in the impact zone but with the american stocks. No connection to brexit whatsoever yet off the rails. In the two training days after the referendum the s p lost more than 5 of its value. It was the kind of bruising decline that makes you want to weep. However, as i have said to you over and over again and i dont care. Maybe just joining the show, join the club, panic is not a strategy. Even if you want out of the stock market, you almost always get a better chance to sell than if you try to do it right in the teeth of a vicious pullback. Thats why as i prepared to do my weekly off the charts segment june 28 which happened to be the first day of the multi week rebound i consulted a guy named Mark Sebastian, a brilliant technician who is the founder of option pit. Com. As well as being my colleague at real money. Com. Hes an expert on the Cboe Volatility Index or the vix for short. Technically it measures the perceived volatility in the near future and goes by the informal name of the fear gauge. The fear index. It is a terrific proxy for the level of terror in the markets. Based on the action in the volatility index sebastian made one of the best calls we have ever had on the show. Remember this is when on june 28 everyone worried brexit would bring the western financial world to its knees. Alan greenspan said it was a terrible time that friday. A lot of guys monday said it wont bounce. Any bounce, sell. Sebastian had it different. Because of the action in the vix he told us the worst was probably over and that the market would likely come roaring back. You can argue that the allclear had been sounded given that the Dow Jones Industrial average finished up 269 points that day. At that time no one was sure if it was looking like a dead cat bounce, recovery rally or the real deal and sebastian made the call that morning. Sent us the charts that morning long before the big up move. Looked like things were precarious. Didnt matter. He was looking at the charts. Whether or not you spot him the first 269 dow points or not, the fact remains, sebastian totally nailed it. Since the bottom call three weeks ago the s p rallied more than 6 . Alltime highs. You have seen this. Its practically been in a straight line. Dow has run 1,100 points. That makes it an incredible call. With near perfect timing. So i had to go back to him. Thats why i wanted to go back. I wanted to explain how he saw it when almost no one did. How he noticed that the panic was misplaced and the averages were ready. So look at this pair of daily charts. The s p 500 on top, volatility index on the bottom. When it comes to the Vix Sebastian watches for patterns in the relationship with the s p. Normally you expect the vix to fall when the s p rallies, when the vix should rocket higher when the s p plummets. They call it the fear gauge. Measures fear when the market goes down. The vix should show tremendous terror. However the vix doesnt always behave like you would expect. When that happens you can get a really powerful signal about the future direction of the stock market and thats what he saw. Thats what happened three weeks ago. Look at this. Specifically june 27, all right . Thats the second day of the brexit selloff redemption day when more money came out of the market any time in the last top ten redemption days in history. The s p continued the vicious decline. All right . But rather than going higher the vix actually came down as well. Look at that. For sebastian the vix pulling back along with the s p 500 going down is textbook. Its a textbook sign that a given selloff is coming to an end. We are measuring here versus here. That was it. Thats all he needed. Sure enough, that little tick down in the volatility index when the s p was going lower was the terrific signal. The stock market rebounded with alacrity and has been roaring ever since. Meanwhile the vix has continued to sink as no one believes brexit will destroy the universe. So much for the hyperbole. How long does he think the bull run can last . He believes this bull has legs. I was afraid hed say its over. Just ring the register. But no. Why is that . Because everything is behaving normally with the vix. Look at the daily charts with a different area highlighted. Sebastian likes that as the s p has gone higher the vix continued to fall lower. Thats just as you would expect. This is classic of the rally continuing. It is an endorsement of the rally. In other words, for this rally to continue to go long we need the vix to be at low levels. As long as thats the case the fear gauge says all is well and the market can keep climbing. What could signal an end . Sebastian the looking for two signs to tell him he needs to get more cautious. First look at the paired charts of the volatility index on top and the vvix on the bottom. Thats an extra v. There is a little calculation coming up here. Just as the regular vix measures volatility of the s p 500, the vvix measures the volatility of the vix index itself. It is like taking the derivative of the vix for those who remember calculus of what would be worrisome is if the vix keeps going down but the vvix rallies. We did see the beginning of that today. Keep an eyen oh it. The vvix going higher would indicate an increase in demand for variance swaps which big managers trade in to hedge long positions n. Short if the vvix is lihigher while the ordinary index is low the smart money is less comfortable in the market. Right now mark said we are fine. This is aokay for the rally to continue. How about in the second warning sign . Lets go back to the twin daily charts of the s p 500 and vix. Just as it was bullish three weeks ago when the vix went lower with the s p 500, sebastian said its bearish when the vix rallies with the s p. When that happens it often is a sign that the market is setting up for a pullback. Go back to mid august of 2015. You will see what i mean. The vix began to climb higher with a rally and the whole market goes into free fall. That was remember, that was the mini crash selloff. It was terrible. Until the volatility index rallies side by side with a rally in the stock market, sebastian believes we could go higher. What could cause the next selloff . If bond yields creep up the clorox, Kimberly Clarks could be less attractive leading to a selloff. As long as buying yields stay low sebastian can see the s p 500 running up to 2,200 over the next month. You want that move, right . That would be something. Here is the bottom line. The chart interpreted by Mark Sebastian indicates the big bull run may not yet be over. Remember, he called it to the day. Its just marking time as it consolidates three weeks of rallies. Sebastian nailed the post brexit bottom and im inclined to stick with him. Hes got the hot hand. I say we go along for the ride. Mad money is back after the break. Announcer lightning round is sponsored by td ameritrade. It is time. It is time for the lightning round. You say the name of the stock. I dont know the calls or the name of the stock ahead of time. I tell you whether to buy or sell. When you hear this sound [ buzzer ] then the lightning round is over. Are you ready, skeedaddy . Time for the lightning round on cramers mad money. Starting with renee in florida. Renee. Caller hello, mr. Cramer. Renee. Caller thank you for your hard work. Thank you. Caller what are your thoughts on abmd . I have felt they could get the take over bid but it went to st. Jude. They have a great mouse trap. How about ben in new york. Ben . Caller hey, jim. Hows it going, man . Doing well. How about you . Caller great, man. I wanted to ask about har. This company got hurt by the strong dollar. I think it is actually cheap at 5. 5 billion dollars. Ive got to tell you, i understand that the quarters have been rocky. How about ron in florida. Ron. Caller hey, jim. A big port st. Lucy florida to you. Beautiful booyah back. Caller juno therapeutics. Remember, they have gotten too difficult. If you are doing anticancer j j or bristolmyers. And that, ladies and gentlemen, is the conclusion of the lightning round zblchlgts. Announcer the lightning round is sponsored by td ameritrade. This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. [dance music playing] [music stops] woman looks like its done. [whistle] [dance music playing] [record scratch] announcer dont let salmonella get funky with your chicken. On average, one in 6 americans will get a foodborne illness this year. You cant see these microbes, but they might be there. So, learn the right temperature to cook each type of meat. Keep your family safe at foodsafety. Gov. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. A little more than two weeks ago the breakup to end all blaekups. Finally went into effect. Im talking about how daniher widely viewed as one of the best run conglomerates on earth decided to split itself into two smaller businesses that would be simpler and much more appealing to Money Managers on wall street who needed to be walked through every story. They dont understand. It has to be simple, clear. Specifically it spun off industries as a new Company Called fortiv on july 2. The Life Sciences, diagnostics, dental and environmental businesses remaining under the old daniher umbrella. The last time i talked to you about the story was a month ago. I told you the new one was worth owning as we headed into the breakup. Now that the corporate divorce is final and the dust has had a couple of weeks to settle its worth visiting in order to answer important questions many of you asked about. We get asked about this one more than almost any other company right now. People dont know what to do. Are they both worth owning . Should you go with one over the other or did we enter into an environment where neither stock is appealing. Lets start by going over the details of the two newly separated entities. Fortiv and the leaner, meaner daniher. Without the Industrial Assets spun off as fortiv, the new danaher is more focused, gets more than half the revenues from the fast growing Life Sciences and diagnostics divisions. The rest of the business comes from dental supply. Thats a good business. Water quality. Product identification division. The new danaher has a health and science focus but thats the least of it. The businesses they kept in the breakup have high growth margins in excess of 50 . Thats good. And Strong Recurring Revenue platforms. In other words this is an incredibly consistent company on top of that its worth remembering while the old danaher planned the breakup the company shelled out 13. 8 billion to acquire pall corp. , a leading provider of filtration, separation and purification that removes contaminants and substances from solids, liquids, and gases. Most of palls assets went into the new danaher Life Sciences business a but the separate divisions were bundled into fortiv. What you have to understand is even though the company has broken up they still plan to follow the old playbook. That means getting into a particular industry, making their operations as efficient as possible. Making acquisitions in the same space and using the rigorous danaher Business System method to bring the newly acquired businesses up to snuff. Its what they have done over and over again for the years i have known them. I like to think of the new danaher as a nice, consistent, secular Growth Company with multiple take over platforms. The life science and diagnostics from 2004 and built up with the 6 pnlt 9 billion dollar brilliant acquisition of Beckman Colter in 2011. Then more with the Pall Corporation acquisition last year. Considering how well they have boosted the numbers im optimistic about what they will do with the pall deal. Danaher has a dental division with a wide array of equipment and consumables including digital imaging, orthodontics and implants. We know from henry shein corporation this is a business in excellent shape. They have done 26 deals since entering the space in 2014. They have the potential for many more. What about the Water Quality business . Here danaher makes instrumentation and disinfection systems to analyze, treat and manage the quality from ultrapure water to waste water. We know from the huge rallies in american waterworks and the infrastructure plays like xylem that this is another fabulous industry. Finally danaher has a high quality Industrial Printing business and they make specialized equipment for printing, packaging and design applications. Im not sure how good that business is versus the others. Doesnt matter. Its not the tail wagging a dog. How about fortiv, the Industries Side of the business. They are professional instrumentation and industrial technologies, each represents half of the company. On the professional instrument side, fortiv has a Field Solutions business that makes equipment which measures and monitors electrical voltage, current, resistance, power quality, frequency, pressure, temperature and air quality. You have a product realization vision with test measurement and monitoring devices that helps engineers convert into finished products. Finally Sensing Technology which makes all kinds of sensors used in manufacturing. The other half is intriguing to me. Thats the Industrial Technology segment divided into transportation, automation and franchise distribution. The Transportation Technologies business makes things like gas stations, fuel dispensers. Truck fleet tracking systems. The Automation Division includes a broad range of businesses that design and manufacture electronic Motion Control products and mechanical components. Lastly, they are all about tools and equipment for auto mechanics. How do we play these very different businesses . Danaher and fortiv. First this is a big improvement. You heard the description of the two businesses, right . You have to believe thats a mishmash of industrial and nonindustrial businesses. They didnt really belong. The new one is a Life Sciences company with a Water Quality kicker and, boy, thats easy to value. All fast growing. Now that the dust has settled in the breakup im reiterating the view that the best way to play it is to keep the new danaher which is superior to the fortiv spin off. Last we heard the life science, Water Quality and dental businesses is the core of the new one had organic growth in the low Single Digits whereas fortiv both divisions saw low single digit declines. Remember, the economy isnt that strong. The new danaher is a noncyclical Growth Company. They dont need the economy to be strong. Thats a safe harbor serving end markets to do just fine regardless of the global industry. Portfolio managers love it. They can sleep at night with danaher but fortivs businesses are more cyclical and i dont know if they can shine more than economies around the world improve more than they have. Not bad estimates. The a. J. S p stock is 20. Fortiv is just below 20 for next year. Both companies are already trading kind of around if not a premium in the case of dhr to the broader stock market. But they deserve it. It deserves more than ftv. Now that the breakup is in the Rearview Mirror im sticking with my view for those who are questioning that the new dhr is the way to play it. While the stocks come up there could be room to run. Sure you may want to wait for the Earnings Report on monday. However, if the numbers are really good, i think you could miss a terrific move. Maybe buy half now. As for fortiv it has potential particularly if it makes acquisitions to bolster growth but it is not what i would get excited about in this environment. It might be a good chit to have if economies around the world react to the endless central banking stimulus that colors this moment in time. Stick with cramer. Nt. Thats why i have the spark cash card from capital one. With it, i earn unlimited 2 cash back on all of my purchasing. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Which adds fuel to my bottom line. 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