One of my favorite ways to picking winning stocks is to wait until we have a truly down day, I mean a real bruiser and see what's still hanging in.
We got slammed today although we were bailed out at the nadir when the president said the Chinese were making nice ahead of the midnight deadline for the tariff increases, and we managed to recover some of the losses.
But intraday? Oh my was it hideous and sometimes it takes a really hideous tape to find some winners.
Remember, earlier this week, which by the way, I am calling hell week because the Uber deal was going to sop up a lot of money from other stocks and because of the trade deadline that comes simultaneously, I said that we would have an across the board selloff where nothing is spared.
But second day selloff would allow some of the safety stocks to hang in there, you know the Procters (PG) and the PepsiCos (PEP) .
The third day of the selloff is when the buyers show their true colors. These are the days when the buyers just stand there and absorb the market's body blows and then start rallying like nobody's business. It doesn't matter that stocks are having the hardest declines this year and the S&P is down for the sixth time in seven days, the buyers simply can't be kept down. Even more incredible, or infuriating if you are short, the buyers literally won't let the stocks stay down. They walk them up with aplomb and even arrogance, as we know that the selling would take these stocks down, too, if the buyers weren't willing to just stand there absorbing the selling and then taking the stocks up during the worst parts of the day. This is a time-honored strategy, a sign that says, stay away we aren't letting you take these stocks down anymore.
And which were the anointed stocks today? The answer: a couple of cloud kings, a company with an amazing quarter and a telco company that just won't quit. Lets take them one at a time.
First, there are the kings, all up for no particular reason other than the pattern I have identified for years: the insistence of buyers to stand there in the middle of the shooting and then pressuring the stocks up with needless concentrated, arrogant buying. I actually don't care about motive, though. I just want to be able to identify where there is so much buying power that the buyers aren't going to let you down.
Let's start with ServiceNow NOW, Workday (WDAY) and Splunk (SPLK) . These have become familiar sights in green on your screen because they are regarded as secular growth stories that aren't going to see their numbers damaged by a trade war or trade truce that our president has expounded upon pretty much every day this week.
Why are these stocks immune? Why were they up so big when the Dow was down 400 points? Simple: buyers don't think that companies that digitize enterprises are going to stop gaining customers just because of trade turmoil.
ServiceNow digitizes information technology freeing up resources to spend more time with customers. You want to use them to board new workers and to automate issues that need resolving by your IT people. I consider ServiceNow one of those companies that enables you to allow more people to be revenue generators, which is pure productivity.
Workday does the same thing for HR and financial management and for solutions to higher education issues. In fact they are one of the few forces to actually keep tuition down, not that anything can really do that effectively. Again, this is about productivity. The fewer people you have doing these functions the more people you have to make money for the enterprise or at least save it.
Then there is Splunk, a company that allows you to data mine while also giving you security solutions. Getting security and business solution answers all in one stop makes Splunk one of the most loved companies for the modern enterprise.
These are three companies we have featured over and over again on Mad Money because they are new, cloud based companies with no peer that have adherents that grab on to these stocks and keep them up even when the Dow was down more than 440 points. They are like stone walls in the midst of intense interstitial fire. Why? Because they have no Chinese exposure to speak of and if the world is going to slow courtesy of a trade war these companies' growth rates will not be impeded.
Next? A stock that continues to defy both gravity and the bears: Roku (ROKU) . What does this company do. Let's just quote the shareholder letter: "Roku is the leading TV streamlining platform for cord cutters". It's the single best way to play the over the top offerings that so many entertainment companies are offering. Again, the letter says "we estimate that more than half of our active accounts are "cord cutters or cord nevers" with 45% TV share up from 37% last year. Roku is riding some wave, I'll tell you, as a recent customer survey of Roku cord-cutters shows that 98% of respondents "would never go back to a traditional pay TV package."
Roku reaches the unreachable: "Our ad platform helps TV advertisers reach audiences that are increasingly unavailable through traditional TV advertising."
Now a lot of people have been betting against this company presuming it is just a matter of time before someone like Amazon (AMZN) builds a better mouse trap. Ten percent of the float is sold short. But the company just seems to get stronger and stronger every time a Disney (DIS) or a Viacom (VIAB) or a CBS (CBS) offers something outside the cable universe. It's the millennial TV investment and that's how come it can be up 17 points on a hideous day with better than expected earnings.
Finally there is T-Mobile (TMUS) . This stock has become a common green sighting in a sea of red in part because if the Sprint (S) deal falls apart - remember it is trying to merge with Sprint to have the best 5G network - the thinking is that it will zoom on its own because it is taking so much share.
I think that's true and T-Mobile isn't skipping a beat through the process, something I can't say for Sprint which seems to be a slow motion train wreck during the approval process, or lack of approval process.
Now you know I favor index funds as the best way to invest, specifically, and S&P index fund. I will never waver from that. But once you have built a nice index nest egg I think it is vital that you learn how to buy a stock and how to buy one when the stock market is down. Sometimes you have to start from the bottom up and search for great investments that you think will withstand a downturn.
Otherwise you can let the market tell you what 's worth examining. That's what ServiceNow, Workday, Splunk, Roku and T-Mobile are telling you what to do.
Now we know the proximate causes of hell week. You have had heard them ad nausea: the tariff increases scheduled for midnight and the humongous deal for the money-losing Uber. What's great about this self-servicing list? If you can survive hell week you can pretty much survive anything and that's just what these stocks did.
(Amazon, Disney and Viacom are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, DIS or VIAB? Learn more now.)
