For investors who figure that the stock market goes in only one direction, Jim Cramer has some headline news.
Jim’s approach is what's known as a barbell, maintaining a variety of stocks so whatever the economic situation is at a given moment, the portfolio overall is resilient.
In his Action Alerts PLUS monthly conference call with club members, Jim talked about stocks that investors might want to stock up on to ensure this kind of resilience, wherever the economic indicators might go.
Here's some examples of Jim’s ideas for stocks that will do well if the economy contracts:
[The] shopping list starts with Abbott Labs. (ABT) - Get Abbott Laboratories Report I know Abbott is up 30 points since we first mentioned it, [but] Abbott has made a ton of money off diagnostic machines for covid. ... Abbott Labs has a fantastic cardiovascular business and diabetes franchise, and they've been hurt by the lack of ability of hospitals to perform elective procedures and doctors to see patients. ... The stock has had a great run, but if there is an exogenous pullback, it's a buy because it will make more money when its whole non-covid portfolio comes to light. So if Abbott comes down, pick some up.
What's the biggest quandary in the portfolio? CVS. (CVS) - Get CVS Health Corporation Report Spoke to Larry Merlo, CEO, yesterday, wanted to be sure that things were more on track than I thought. ... It's paying down debt -- that's one of the things we worry about, the balance sheet is doing rather dramatically -- while reaping the benefits of the purchase of Aetna. ... The stock sells for 9 times earnings even though Amazon (AMZN) - Get Amazon.com, Inc. Report truly has no ability to wipe it out because it doesn't just sell soft goods. ... It's a waiting game. Too cheap to sell. And in the 50s, then, you have to say I need to buy this one if only because of the Aetna portion. ...
Now, how about this one? Disney (DIS) - Get Walt Disney Company Report just had another one of its patented bursts, this time because we now recognize Disney Plus is a monster of 60 million [subscriptions.] ... I am not as keen about the stock up here after just a huge run. Remember, we are trying to own stocks that won't get crushed while we wait for the vaccine and then [will] soar when it arrives. Disney is the No. 1 stock in the universe that you can just bide your time on. But it's also the one that if this thing goes on and we have to close the country again, it's got real risk.
What is Cramer watching to gauge the direction of the economy? Welcome to retail earnings week.