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Cramer's 'Mad Money' Recap: Big Rotation Begins (Final)

Stocks in this article: SODAARMHAAPLNATLINEDRYS

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NEW YORK ( TheStreet) -- "It's too late to sell the smokestack stocks," Jim Cramer told the viewers of his "Mad Money" TV show Wednesday.

He said the rotation out of the consumer staple stocks has begun, and the big money is moving back into the industrials.

Cramer said we've probably reached the high-water mark for stocks like Procter & Gamble (PG) and the bottom for stocks like Cummins (CMI) and Caterpillar (CAT), a stock which Cramer owns for his charitable trust, Action Alerts PLUS . Why the move now? In a word, valuation.

Cramer said a stock's valuation matters, and when a company's shares reach a price earnings multiple twice that of their growth rate, that's when the big institutional investors begin dumping.

That doesn't mean that investors should dump their Pepsico (PEP) or General Mills (GIS), but that does mean those who can't take the pain should use tomorrow's strength to lighten their positions.

Cramer likened the stock market to a game of "Chutes and Ladders," saying the markets never move in a straight line. There will always be rotations in and out of different sectors, he said.

But, Cramer noted, he invests based on long-term trends, like the need for more food, more roads and the need to mine more coal to fuel the world's energy needs. Cramer said he's not going to be held hostage by every 50 cent move in the price of oil or the euro.

"Rotations happen," said Cramer, but that doesn't mean we need to play every move like it's 2008. The long-term trends are still good, which is why investing in the now cheap industrials makes perfect sense.

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