Capital gains taxes were all the talk on Wall Street Thursday, but Jim Cramer told his Mad Money viewers they need to stay focused on the fundamentals and stop fearing the tax man. He reminded viewers of four of his key rules of individual investing.
Cramer’s first rule was simply “don’t fear the tax man.” Profits are a good thing, after all, and no matter how big the capital gains tax you have to pay, you’re still going home with a win.
Second, don’t worry about where a stock has been, only where it’s going. Whether you have big gains, or small losses, the only thing that matters today is whether your stock can still head higher. If it can, keep it. If not, sell. Your cost basis is never a reason to keep a stock.
Third, Cramer said to be ready with a shopping list of stocks to buy if there’s a tax-fearing selloff. If a company’s fundamentals are strong, you should be a buyer when the market puts shares on sale.
Finally, Cramer said investors need to keep an eye out for stocks with high dividend yields. Dividends are taxed at a lower rate than capital gains, making them more appealing to those who need income.
However, before worrying over whether capital gains taxes may rise, investors need to remember that any proposed increase will have to make its way through Congress, which isn’t likely to happen in the first place. Also keep in mind that for most of us with stocks held in tax-favored retirement accounts, these tax proposals don’t even apply.
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Executive Decision: Mattel
For one of his “Executive Decision” segments, Cramer also spoke with Ynon Kreiz, chairman and CEO of toymaker Mattel (MAT) – Get Report, which just posted a stellar quarter that included sales up 47%.
Kreiz confirmed that it was a record quarter for Mattel and the company is in the strongest position it’s ever been. Not only did it exceed expectations, but it saw double-digit increases for the third consecutive quarter.
Among the highlights was Barbie, which saw tremendous growth of 86% in the quarter as the brand’s new image and products resonate with girls around the globe. The transformation of the American Girl brand was also accelerating, Kreiz said, leading to 22% growth.
Mattel has also been hard at work cleaning up its balance sheet, paying down debt and dramatically reducing their interest expenses.
Executive Decision: Intel
For another “Executive Decision” segment, Cramer checked in Pat Gelsinger, CEO of Intel (INTC) – Get Report. Gelsinger recently took the helm at the Intel after a self described “11-year vacation” from working at the company.
Gelsinger said Intel is focused on execution, leadership products, innovation and rebuilding their culture, four things that have lost their way in recent years. It’s only been a short time, he said, but already, they are seeing the Intel engine beginning to restart.
Intel is taking a new, more collaborative approach to IDM, or integrated design and manufacturing, Gelsinger added. The new approach works closely with cloud providers to optimize chips and solutions for specific applications. Even small improvements, he said, translate into huge gains at scale.
When asked about building more chips in the U.S., Gelsinger said it’s critical that America reclaim its role as a leading manufacturer of semiconductors. Twenty years ago, America had 37% marketshare for semiconductors. Today, we’re down to just 12%. Other governments are investing in technology, Gelsinger added, and we need to invest as well.
Executive Decision: Nestle
In a third “Executive Decision” segment, Cramer spoke with Mark Schneider, CEO of Nestle S.A., the packaged foods maker that just posted results that included 7.7% organic growth.
Schneider said Nestle is seeing a recovery both in China and in their out-of-home products that are sold to restaurants and hotels, but the company’s in-home business still remains strong. Everything from coffee to pet food is driving Nestle’s business higher, he said.
When asked about their sustainability efforts, Schneider said there’s a business case emerging for sustainability. Customers are demanding it, he said, and government regulations regarding the environment are only going to get stricter over time. That’s why Nestle’s overall philosophy is to make products that are good for you and good for the planet.
Turning to the company’s surging coffee sales, which were up 17% organically, Schneider said that the gains represent both market share wins and increased consumption at home, where people are still spending most of their time.
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At the time of publication, Cramer’s Action Alerts PLUS had no position in the stocks mentioned.