- Williams-Sonoma is in a sweet spot in the home goods space, CNBC's Jim Cramer says.
- The "Mad Money" host also explains how the market's top retail stocks are succeeding.
- In the lightning round, Cramer warns about investing in master limited partnerships.
In a market plagued by worries about more tariff exchanges between the United States and China, CNBC's Jim Cramer knows what investors are looking for: the stocks of safe, domestic, consumer-facing companies.
That's why the " Mad Money " host decided to review the recent trajectories of Bed Bath & Beyond BBBY , Wayfair W and Williams-Sonoma WSM , three home goods retailers with very different business models and prospects.
"Let’s compare the three because I think this is an important exercise [to] help you understand why some stocks work and others don’t," Cramer said.
Bed Bath & Beyond, the weakest of the three by Cramer's standards, has been struggling of late, pressured by competition from Amazon and questionable management decisions.
The e-commerce-focused Wayfair, however, is soaring, growing almost too fast given the company's lack of profitability, the "Mad Money" host said.
Then there's Williams-Sonoma, the parent of Pottery Barn and West Elm that is in the middle of a robust comeback and seems to have mastered the combination of online marketing and brick-and-mortar presence.
"They’re like Goldilocks and the three bears," Cramer said.
"Bed Bath & Beyond is too cold — those guys are trying, but the company just hasn’t invested enough in e-commerce and the business has been left behind. Wayfair’s too hot — they’ve got a great online-only strategy, but the stock has doubled just since the end of April and I think you[’ll] get a pullback if you wait," he continued. "Then there’s Williams-Sonoma, on the other hand. It’s just right: after years of testing, they’ve figured out how to seamlessly merge their digital and real-world businesses and the latest numbers were amazing. So if you want a nice, domestic home goods retailer, I say stick with Williams-Sonoma."
How Netflix pared its post-earnings losses
When the stock of Netflix rebounded on Tuesday, driving the Nasdaq to a 52-week high, Cramer knew he had to explain Netflix's rally, especially after the company failed to appease investors with its second-quarter earnings report .
"Of course the stock was laid to waste," he said. "The mystery here is not why Netflix got shoved into the woodchipper like Steve Buscemi in Fargo; it’s how the heck was the stock able to claw back most of its declines in an almost Lazarus-like resurrection?"
Click here for some of his theories.
Cramer's top retail plays — and how they're winning
It's not easy staying in style on the Wall Street fashion show, but on Tuesday, Cramer noticed that three names were doing it best: Canada Goose , Lululemon and Urban Outfitters .
"When you look at the best-performing apparel plays, you see two things," Cramer said. "There are the companies that have figured out how to compete on the web with a workable omni-channel strategy, as they call it, and, more important, there are the ones with the best understanding of what the consumer wants."
Luxury winterwear maker Canada Goose, famous for the ubiquitous red patch on its fur-lined parkas, has seen its stock soar since its initial public offering .
Cramer recommended buying shares of Canada Goose the day it came public. A few months later, he told investors to ring the register on part of their gains after a 175 percent rally.
"Nobody ever got hurt taking a profit, but I definitely made a mistake here: I was too skeptical of a great story," he admitted.
Read more of his analysis here .
Off the charts: Biotech comeback?
Cramer was somewhat surprised to see the biotechnology sector bounce back in 2018 after months of weakness.
"At a time when President Trump keeps slamming the pharmaceutical industry over excessive drug pricing, ... you might think that the biotech stocks should be getting slaughtered," the "Mad Money" host said on Tuesday.
"But you know what? After spending a long time in the doghouse, biotech as a whole is actually having a pretty darned good year, with the Nasdaq Biotechnology ETF , the IBB, up 17 percent for 2018," he continued.
To make sense of the biotech stocks' new leadership role, Cramer brought in technician Bob Lang, the founder of ExplosiveOptions.net and part of TheStreet.com's Trifecta Stocks newsletter team.
Lang, who uses technical tools to track the action in particular stocks, decided to look at the group's most recent leaders and laggards.
Get his full analysis here .
Unpacking Tuesday's disparate rally
Finally, Cramer took it upon himself to explain how three typically disconnected groups of stocks — the defensive, "recession-proof" stocks, the cyclical stocks and the homebuilders — all managed to rally at once in Tuesday's trading session.
These three groups "simply aren’t supposed to move in the same direction at once," Cramer said.
His theory? Investors who were concerned about the flattening yield curve flocked to the defensive plays; those who bet on the strength of the economy bought into the cyclicals; and those who thought the Federal Reserve would continue to gradually raise interest rates turned to the homebuilders.
"So, what does it all mean? I think these moves are all about a recognition that we have a very thoughtful, very sophisticated Fed chair who’s not going to jump to any conclusions to slam the brakes on a good economy or throw acetylene to make the economy overheat," Cramer explained after Fed Chair Jerome Powell congressional testimony .
"A Fed chairman who wants to balance the risks, relies on the data and seeks to do the considered thing is exactly what a stock market looks for," the "Mad Money" host said. "He’s become a force for those who are bullish, which is how all these disparate groups could rally at once today."
Lightning round: Bucking oil trends?
In Cramer's lightning round , he flew through his take on callers' favorite stocks:
Buckeye Partners : “Don’t buy any more. Last night, [Enbridge CEO] Al Monaco , I think, opened a lot of people’s eyes with Enbridge when he basically said that the master limited partnership model is not working, therefore I think that my inclination is don’t buy any more of that stock.”
Applied Materials, Inc .: “Applied Materials, I think, at this level, is too cheap. I saw Lam Research going up. Now, it may take the whole cycle. It may actually literally take six to nine months for Applied Materials to come back, but I am urging patience.”
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