• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Jim Cramer

Jim Cramer: Let's See Who's Safe, Who Isn't

You can use these wild market swings to your advantage by identifying 'safe' companies you want to own and then buying their stocks in stages.
By JIM CRAMER Mar 10, 2020 | 04:34 PM EDT
Stocks quotes in this article: CCL, AAL, DRI, OXY, ABBV, AEP, ED, D, SO, ADBE, CRM, MSFT, NOW, GOOGL, AMZN, FB

Who's safe. Who isn't? Who needs help? Who needs a miracle to stay in business? Who's already lost.

That's what it's coming down to in the age of Covid-19. That's also what's impacting stocks and that's what's making and losing you money and before you pick from the rubble.

Let's go over what you do if you are trying to buy stocks after a giant decline like we have had.

First, you have to recognize that the market, for all intents and purposes, right now isn't working well. The swings are sign of unhealthiness. They are indicative of how people are scared and there are far fewer players and far too many machines for stocks able to handle the impact. Plus you have hundreds of exchange-traded funds pulling and pushing stocks in an unseen fashion. That's the bad news.

The good news is that you can use these wild swings to your advantage by identifying companies you want to own and then buying their stocks in stages. That way, if you buy some of a stock when the market is up 900 points, as it was in the morning and then it plummets to negative territory, you have a better basis. In a broken market like this one, where things move so fast that sellers can't be lined up and then buyers disappear, you have to be willing to own and more and more on the way down. If you are going to buy a stock and then not think it is cheaper as it goes down, you need to sell it now. This is a market where you need rock solid conviction, so when your stock goes down you regard it as an opportunity not a curse. A swing from up 945 to zero, as nutty as that is, must be viewed as a gigantic sale of merchandise, good and bad, and you have to buy the good ones.

How can you tell the wheat from the chaff? You have to try to answer the puzzle of what kind of downturn do you have.

I have said over and over again that this is a biological crisis, not a financial one. Yesterday, though, it turned into an oil and biological crisis, with the collapse of oil prices. We are the world's largest oil producer because of all the oil we produce by fracking and the Russians don't like it. They are trying to knock us out and the Saudis aren't helping. At these prices, many of the oil companies we know will go under. If the prices come back, they will be fine.

But how can they come back if the Saudis start pumping at a rate of 12 million barrels a day, almost as much as we produce while the Russians try to flood the world with oil? We just don't have enough demand. I don't care about the 10% gain today. I don't think it is sustainable, and we are going to go over that when we go off the charts later on "Mad Money."

So lets do some elimination from the get-go.

In a biological crisis, you need to be worried about your health. The best way to preserve your health is to not go anywhere. The worst way is travel or go out. That means, to me you can't touch the entire entertainment, hotel, restaurant, retail, and airline complex until Covid-19 is solved. The good news is that it seems to have peaked in some countries like Japan and South Korea. The bad news is that's it gone nuts in Italy and Iran. Which are we? We don't know yet. We don't have enough testing kits to tell, a far cry from the South Korean drive through testing that has made people feel far more confident. The sooner we get those kits, the better we will feel and the more likely we will go out.

The president is actively discussing ways to tide these industries over: low-to-no interest loans for small businesses, sick leave pay so people aren't infecting others, delayed filing of taxes while waiving penalties and interest and perhaps even a payroll-tax cut. All of there can and will help. They are a sign that the president isn't just hoping for the best, he is preparing for the worst and so was Secretary of Treasury Steven Mnuchin, a man with solid credibility on the Hill and the business community, to help get this done.

I am encouraged, but it is not a reason to go buy Carnival (CCL) , American Airlines (AAL) , Darden (DRI) . The goal is to tide over small business, not help the giant companies, especially the national chains. You do not want to buy these stocks going into a possible slowdown or even a recession.

Then there's the oil patch. Today Occidental (OXY) had to cut its dividend. What a comeuppance, but it was not prudent after the reckless buy of Anadarko Petroleum last year. The stock rallied for its conserving the capital. But big deal. If you think oil is going to stay down here, then the whole complex should be avoided.

Now, you must understand that the market is bringing down the bank stocks over a belief, a false belief, that they will repeat the same swoon they experienced during the Great Recession. I think that's nonsense. I know, though, that their earnings would be hurt, which makes them a buy only when they hit high yield territory as they were last night. They are trading vehicles right now, and not much more, although some of them make darned good trades.

So what does work now that we have taken so many sectors off the table?

First, you can buy pharmaceuticals whenever they get to 3% yield. This happens in pretty much every swoon. Given that everyone's worried about a recession and rates are so low these just make plain common sense. Think AbbVie (ABBV) , which was down Tuesday after a good analyst meeting, because the crowd decided the Trump stimulus plan will beat back a recession.

Same with utilities that yield above 3 with some growth possibilities. I like American Electric Power Company (AEP) , Consolidated Edison  (ED) , Dominion (D) and Southern Co. (SO) .

And then there are the toughest ones, the secular growers where you are making a bet that they will grow no matter what. To me that means the cloud, companies like Adobe (ADBE) , Salesforce.com (CRM) , Microsoft (MSFT) and ServiceNow (NOW) . I like Alphabet (GOOGL) and Amazon (AMZN) . I think Facebook's (FB) ad numbers could be late but the stock is down low enough that it may compensate. These kinds of high growth companies will be able to outperform in a recessionary economy because they are used no matter what.

I have always favored the fastest growing tech in a slowdown. They bounce back quickly and become leaders of the next leg up, which we will while we cure Covid-19, which I am still convinced we will if we adopt my Manhattan Project plan of pulling all stops to do so.

I know that it seems like a small list, but accept the fact that until today, I had been adamant that only pharma and a handful of utilities worked. But now that we are further along and we see that the issues are about paid sick leave and perhaps bailouts to keep big entities alive, I feel better that we remain in a deflationary cul de sac and that's when tech totally shines.

(ABBV, CRM, MSFT, GOOGL, and AMZN are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells them? Learn more now.)
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Biotechnology | Pharmaceuticals | Retail | Technology | Technology Hardware & Equipment | Jim Cramer | Coronavirus

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • 12:08 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    As a Portfolio Name Agrees to a Merger, Here's Our...
  • 10:44 AM EDT PAUL PRICE

    My Very Best Pick for the Next 12 Months

    American Woodmark . It rarely gets better than th...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login