Cramer's Mad Money Recap 4/12: Devon Energy, Robinhood, Twilio

Hope is not an investing strategy, even when it’s all you have, Jim Cramer reminded his Mad Money viewers Tuesday, after the latest Consumer Price Index reading roiled the markets into another day of declines. Cramer said positivity and optimism are good things to have, but when it comes to investing, you simply cannot hang your hat on hope alone.

Today’s CPI number was up 8.5% year-over-year, signaling the worst inflation we’ve seen in 40 years. Not only that, Cramer found little hope for the future.

The price of the average used car has risen 40% over the past year. And while ultimately, rising prices will eventually lead to demand destruction, the underlying reason for elevated prices is a lack of new cars due to semiconductor shortages. Chipmakers are trying to correct the problem, but it still may be another six months before supplies can meet demand. That means there’s no hope in sight for autos.

Russia’s invasion of Ukraine has disrupted two other key sectors of our economy, food and energy. Ukraine accounts for 13% of global calories produced, and that production isn’t likely to get planted anytime soon. The world is also scrambling to stop buying Russian oil and gas, supplies that will take years to replace.

Lastly, there’s China, which is battling a wave of Covid by locking itself down rather than asking the U.S. for our highly effective vaccines.

All of these things aren’t likely to change in the short term, Cramer concluded, which is why he can’t be optimistic about the markets.

If Oil Prices Remain High, HighPeak Energy

If you believe that oil prices are going to stay elevated, then it’s a great time to invest in an oil producer. Cramer has previously recommended stocks like Devon Energy (DVN) – Get Devon Energy Corporation Report, Pioneer Natural Resources (PXD) – Get Pioneer Natural Resources Company Report, Diamondback Energy (FANG) – Get Diamondback Energy, Inc. Report and Coterra Energy (CTRA) – Get Coterra Energy Inc. Report, but today he added another name to the list, HighPeak Energy (HPK) .

HighPeak is a relative newcomer to the oil patch, having come public via a SPAC merger. But the stock hit the ground running and shares are up 50% so far in 2022.

HighPeak has some of the best numbers in the industry. The company has 63,000 acres in the Permian Basin that includes 500 locations with another 900 in the wings. Nearly 85% of HighPeak’s production is oil, which is able to take advantage of these $100 a barrel prices.

But the best part, HighPeak’s break even is just $28 a barrel.

HighPeak is aggressively ramping up production to take advantage of high prices at a time when more other producers are maintaining their discipline. Production soared 81% in the company’s most recent quarter.

With shares up 50% for the year, you’re not going to be early, Cramer admitted, but this company still has a long way to go.

Scroll to Continue

Growth at a Reasonable Price

Continuing his week-long series looking for GARP, or growth at a reasonable price, Cramer delved into the financial sector to discover four names that fit the GARP criteria.

Everyone knows about the six big money center banks, but few focus on names like Signature Bank (SBNY) – Get Signature Bank Report, the business-oriented bank that also focuses on wealthy consumers. Signature offers consistent growth for just 13 times earnings.

Then there’s State Street (STT.PRD) and Bank of New York Mellon (BK) – Get Bank of New York Mellon Corporation Report, both of which are pivoting into crypto currency while still maintaining growing traditional businesses. State Street trades at 10 times earnings, while Bank of New York is well off its recent highs with a 2.8% dividend yield.

Finally, Cramer recommended Charles Schwab (SCHW) – Get Charles Schwab Corporation Report, the discount broker that may not be in the headlines like rival Robinhood (HOOD) – Get Robinhood Markets, Inc. Class A Report, but trades at a very cheap 20 times earnings.

Executive Decision: Twilio

In his “Executive Decision” segment, Cramer spoke with Jeff Lawson, co-founder, chairman and CEO at Twilio (TWLO) – Get Twilio, Inc. Class A Report, to discuss the company’s findings in their annual State of Customer Engagement Survey.

Lawson said this year’s survey again pointed out a big gap between what companies are doing and what consumers are expecting. Nearly 75% of companies said they’re doing a great job personalizing their offerings for consumers, but only 50% of consumers indicated that companies are doing, at best, only an “OK” job.

What consumers want is companies to listen to them and to tailor their offerings to their individual needs. Most companies however, still have a long way to go. Companies that have been successful in personalizing, however, have seen revenues grow by up to 70%.

If content isn’t relevant to consumers, they unsubscribe, Lawson said, and that means companies must pay to reacquire customers with every purchase. What they need, he said, are relationships that last.