In his second "Executive Decision" segment of Tuesday night's Mad Money program, Jim Cramer sat down with David Farr, chairman and CEO of Emerson Electric Co. (EMR) , the industrial conglomerate that just received the attention of an activist investor.
Farr started off by saying that the Emerson's business continues to perform well, with 5.5% sales growth for 2019. That said, Emerson operates in a difficult macro environment with challenging global dynamics. That's why Farr is speaking to all shareholders, including the activists, and they've spoken loud and clear that they want the company to continue to generate high returns, even in a slowing or no-growth economy. Farr said those plans are already underway as Emerson is cutting costs and firming up its balance sheet so it will be positioned to grow when the global economy rebounds.
Turning to China, Farr said that China remains Emerson's second largest market and continues to grow. The company has 25 facilities and a few research centers inside of China and Emerson is taking market share with innovative products their Chinese customers love.
Cramer said investors looking for an industrial stock to add to their portfolio need to consider EMR, which is doing all of the right things to strengthen its business.
In this daily bar chart of EMR, below, we can see that prices have been making lower highs from April. Prices are trading between the 50-day moving average line and the 200-day moving average line. That condition will not last for long.
The daily On-Balance-Volume (OBV) line has been in a gentle decline from February and has yet to signal a move to more aggressive buying.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is above the zero line in positive territory but recently crossed to the downside giving us a take profits sell signal on this time frame.
In this weekly bar chart of EMR, below, we can can see a mixed picture currently. Prices are trading below the now rising 40-week moving average line.
The weekly OBV line has been in a downtrend from April and signals that sellers of EMR have been more aggressive. The MACD is improving from a cover shorts buy signal.
In this Point and Figure chart of EMR, below, we can see a potential downside price target of around $58.
Bottom line strategy: EMR seems to have a promising fundamental story but the charts currently suggest that we could have another retreat towards the August low. This pullback could be a buying opportunity for higher prices in 2020.
