Don’t make this mistake during earnings season

CNBC’s Jim Cramer on Thursday stressed the frustrations that pre-market trading can cause during earnings season.

Reacting to the headlines to make investment decisions can mislead investors that are “trigger happy,” the “Mad Money” host said. There is more to the underlying company’s story.

“Don’t buy or sell anything based on earnings until you’ve listened to the actual conference call,” he warned.

Cramer pointed out trucking giant J.B. Hunt, which, after posting weaker-than-expected quarterly earnings, sold off $3 before closing up $5 on Tuesday. Investors that took a risk and bought shares on the weakness made as much as an $8 swing, he said.

“During earnings season, the headlines come so fast and furious that I think a lot of those headlines are written by machines. They’re not great at capturing nuance,” Cramer said. “If you waited for the conference call, you would’ve hurt management say they were disappointed about some line items, but generally they told a story of growth, despite rough conditions.”

The host also recalled the stock action in railroad company Union Pacific. The company’s shares sold off after CSX delivered an abysmal quarter earlier this week, but Union Pacific beat Wall Street’s earnings expectations in its Thursday report. The stock rallied 5.9% during the session.

“Nobody’s making you swing at these curveballs, sunshine,” Cramer said. “Just be patient and keep your bat on your shoulder until you have all the information.”

Get his full thoughts here

The once-consistent Netflix has “suddenly become erratic” as investors grapple with the company’s second-quarter subscriber woes, Cramer said.

The share price tumbled more than 10% during the session and the reaction from portfolio managers influenced moves in the rest of the market as the averages digested earnings, he said. The Dow Jones Industrial Average added a little more than 3 points, snapping a two-day losing streak. The S&P 500 gained 0.36% and the Nasdaq Composite rose 0.27%.

“We’ve seen Netflix stumble before, especially maybe after a price hike, but not quite like this. In one fell swoop, Netflix went from easy money to hard money,” the host said. “In a single quarter, Wall Street went from sanguine to skeptical.”

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Digital banking is a key strategy to appeal to millennial consumers, Bank of America CEO Brian Moynihan told CNBC.

He estimates the bank serves 16 million millennial customers, ranging between the ages of 25 and 41, who have about $200 billion worth of deposits, investments and loans with the bank.

“They have, you know, $60-70 billion of checking deposit … and then Gen Z adds another chunk on top of that,” Moynihan said in a one-on-one with Cramer. “As a millennial-only bank, it would be one of the biggest banks in the country.”

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Cramer broke down why IBM’s $34 billion price tag to buy Red Hat was worth the cost.

Paying $190 a share for the open-source software, the October deal came at a 63% premium in part. Cramer argued that premium is understandable because IBM was not the only bidder. In late 2018, Red Hat revealed that there were three other bidders without naming names. CNBC previously reported an offer from Alphabet’s Google was entertained, and Stifel analyst Brad Reback also said that Google, Amazon and Microsoft engaged in discussions.

“It was a competitive situation, people, so IBM paid what they had to pay to get the job done,” thehost said. “But, honestly, that 63% number it’s a little misleading, frankly.”

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Steel company Nucor CEO John Ferriola told Cramer that the Trump administration and the U.S. Commerce Department has taken a number steps to prevent China from flooding the U.S. market with cheap and low-quality steel. And for that, he’s satisfied.

“We’re very pleased with the results that are happening as a result of the tariffs” on Chinese imports, he said in an interview.

Catch the full discussion here

In Cramer’s lightning round, the “Mad Money” host zips through his thought about callers’ stock picks of the day.

Tesla: “Why do I have to buy the stock? I’m going to congratulate [CEO Elon Musk] for making a lot of cars. I think that does the — I mean that’s the ticket.”

EPR Properties: “They have hit it out of the park. Buy, buy, buy.”

Six Flags Entertainment: “Too hard. It’s become too hard. I don’t like too hard. That’s an example of hard money. I like easy money.”

Disclosure: Cramer’s charitable trust owns shares of Microsoft, Alphabet and Amazon.