Jim Cramer says a publicly-traded company can’t be in a “best of breed” class unless that company is the very best in all facets of running a business.
“Great companies prevail,” Cramer wrote recently on Real Money. “Best-of-breed companies don't go away and you can't sell them because they are built to last and have the best management.”
Currently and out of nowhere, rising interest rates are leading to the wholesale abandonment of technology stocks. “At this very moment you can't touch Salesforce (CRM) - Get salesforce.com, inc. Report or ServiceNow (NOW) - Get ServiceNow, Inc. Report; Apple (AAPL) - Get Apple Inc. (AAPL) Report is toxic,” Cramer said. “Facebook is a black hole and Amazon (AMZN) - Get Amazon.com, Inc. Report has its numbers cut because of labor costs.”
What matters to Cramer, however, is that you don’t throw away an Amazon or an Apple because others are doing so. “Think about all of the times you saw people dump Alphabet (GOOGL) - Get Alphabet Inc. Class A Report or Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report only to come back to them when the industrials falter or the banks miss their numbers, which will probably happen again when they report in a few weeks,” Cramer noted.
That’s why you need to be thinking about what's best of breed and can figure things out. “Do you really think that Amazon doesn't know how to rein in costs?,” Cramer asked. “Are you sincerely worried about Apple's iPhone buildout because you see electricity being cut back in China causing factories to close?
One fly in the ointment are some worrisome FAANG signs.
“I wonder if Facebook is getting real pushback from advertisers because of worries about being next to foul content,” Cramer said. “We saw Instagram's head talk about pausing development on a kids' site, which I regard as an admission that they have to do more. I am also conscious that Salesforce CEO Marc Benioff, often considered the godfather of tech these days, does not have a positive view of the company.”
Companies don't become best of breed unless they are the best in everything they do. “So Facebook hangs in the balance,” he added. “I have faith that CEO Mark Zuckerberg can pivot even if he thinks he is doing everything possible to make his site safe. It's not up to him, though. It must be up to others in the company whom he must be beholden to. Otherwise the company will become just another also ran and you will want, on a dip like this, to buy the great American companies that are momentarily out of favor and Facebook, which I own for my charitable trust, won't be one of them.”