It’s easy to scare yourself out of the market during a selloff, Jim Cramer told his Mad Money viewers Tuesday. But rather than running and hiding, the more prudent thing to do is to use market selloffs to do some buying. Cramer offered up his list of the three types of stocks you should be looking to buy when everyone else is selling.
The first type of stock to buy during a selloff are those that are rallying while the rest of the market declines. Today, that was Amazon (AMZN) – Get Report, which received good news from the Pentagon, which canceled a big contract with Microsoft (MSFT) – Get Report. Shares of Amazon are up 15% over just the past month and Cramer said the momentum remains strong. Investors can also consider names like Apple (AAPL) – Get Report, another Action Alerts PLUS holding that ended up 1.4% by the close.
The second type of stock Cramer would be buying on down days are those on your shopping list that are now on sale. Stocks like Devon Energy (DVN) – Get Report rarely see down days when oil demand is strong, which makes today’s 5% decline a gift.
The final class of stock that Cramer would buy are those great companies that are only declining because the broader markets are. Stocks like American Express (AXP) – Get Report fit this bill, as the company is doing great and was only pulled lower because it’s a part of so many ETFs.
When buying stocks on down days, don’t be arrogant. You’ll never know exactly how far shares will fall. That means being patient and buying in stages as the markets tumble lower.
Stocks finished mixed Tuesday, with the S&P 500 snapping a seven-session winning streak, as Wall Street came out of a long holiday weekend and oil prices turned lower. The Dow Jones Industrial Average finished down almost 209 points, or 0.6%, to 34,577, the S&P 500 declined 0.2%, and the Nasdaq finished up 0.17% at a record close.
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A Second Look at SPACs
Earlier this year, several special purpose acquisition companies, or SPACs, collapsed under their own weight. Many deals turned out to be just promises, while others couldn’t live up to the hype. There is one group of SPACs that’s begun making a comeback, however: the SPACs that have already completed their mergers and now have solid growth and earnings.
Cramer said he’s a big fan of energy storage provider Stem (STEM) . Our electric grid is a wreck, he said, and companies are scrambling to become more eco-friendly. It’s no wonder Stem reported revenue up 200%.
The next SPAC worth investing in is Beauty Health SKIN. This purveyor of non-invasive skin treatments has sold over 17,000 delivery systems to spas around the globe and now has a lucrative business selling consumables.
Cramer was also a fan of SoFi (SOFI) – Get Report, the online lender that’s now becoming a full-fledged bank. Shares bottomed in mid-May, but recent weakness gives investors another chance to buy in.
Finally, Cramer said investors looking to invest in cannabis should skip the growers and look into WM Technologies MAPS, which provides technology solutions for the cannabis industry.
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Picking the Winners
The stock market is seeing incredible variety in what’s working, Cramer told viewers. In that kind of environment, picking winners can be as simple as looking at the top performers in the S&P 500. Cramer took a peek at last quarter’s biggest winners and found a few favorites.
First up was chipmaker Nvidia (NVDA) – Get Report, which rose 49% in the quarter as investors renewed their hopes the company’s acquisition of ARM Holdings (ARMH) might be closing soon. Next was Devon Energy, which Cramer said is benefitting from efficient spending at the company and a variable dividend that pays shareholders more as crude prices rise. Shares of Devon are up 33% for the quarter.
Also making the list of top performers was Pool Corp (POOL) – Get Report, up 32% in the second quarter. Pool Corp continues to benefit from the rise in home improvement spending. Gartner (IT) – Get Report made the list, up 32%, as the company’s research services are top of mind for enterprise IT spending.
Finally, Equifax (EFX) – Get Report rose 32% in the quarter. Just a few years ago, Equifax suffered a massive data breach. Today, the company has reinvented itself and shocked Wall Street with better-than-expected earnings.
Continuing his look back to last quarter, Cramer highlighted the biggest winners on the Nasdaq, many of which continued to be COVID winners, despite the economy beginning to reopen.
The best stock in the Nasdaq last quarter was Moderna (MRNA) – Get Report, up 79%. Cramer said shares are pricey, but if you believe the Delta variant of COVID spells trouble, shares could continue to rally. Next was Nvidia, which also appeared in the S&P 500 list, along with DocuSign (DOCU) – Get Report and Idexx Labs (IDXX) – Get Report. Cramer said after consumers try signing documents and ordering their pets’ medications online, they don’t go back.
Rounding out the winner’s circle was Intuit (INTU) – Get Report, the small business software maker with shares up 28% in the second quarter. Intuitive Surgical (ISRG) – Get Report also made the list and was the only reopening stock to do so. Cramer remained a fan of both stocks.
What Happened to Didi?
In his “No Huddle Offense” segment, Cramer said after today’s implosion of Didi (DIDI) – Get Report, which plunged 19.5%, he’s swearing off Chinese IPOs for good.
“Enough is enough,” Cramer proclaimed, after the Chinese government banned new customers from downloading Didi’s app, effectively stopping the company in its tracks just one day after their U.S. IPO.
Cramer called the move “vicious” and said it was a crushing blow designed to sabotage American investors.
But Didi isn’t the only problem. Of the 35 Chinese IPOs this year, 22 are trading below their offering price, with 15 of them, nearly half, off 20% or more.
American investors don’t need these substandard IPOs, and our government should simply put a stop to all Chinese IPOs until they can be held to the same standards as their U.S.-based counterparts.
Here’s what Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Tuesday evening:
RadNet (RDNT) – Get Report: “It’s a great situation. They have a lot going to them and that’s a good situation.”
Bionano Genomics (BNGO) – Get Report: “I love all of the genomics plays. One of them will make up for all of the rest.”
Modine Manufacturing (MOD) – Get Report: “That’s a sweet industrial stock that most people don’t even know about.”
C3.ai (AI) – Get Report: “This is a tough one. This is an interesting business, but I want to be in Nvidia.”
Nano Dimension (NNDM) – Get Report: “I’m going to have to say no. This one is played out.”
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At the time of publication, Cramer’s Action Alerts PLUS had a position in AMZN, MSFT, AAPL, NVDA.