In a tough market, you need to circle the wagons around a handful of winners, Jim Cramer told his Mad Money viewers Thursday, and have the conviction to buy more as things go lower.
Cramer said the lesson from Thursday's market meltdown was that things had gotten too easy. When everything is going up, you know you're in for a real bruising.
Cramer said many sectors are still too high, even after the day's big declines. The oil stocks remain untouchable as we still have far more supply than demand.
Travel and leisure cannot be bought until we have a vaccine.
Just about all of retail also shouldn't be bought, with the exception of Costco (COST) - Get Report, Home Depot (HD) - Get Report and Amazon (AMZN) - Get Report. Lastly, Cramer said the banks won't be able to make money until people start borrowing again.
Instead of gambling in these sectors, Cramer urged viewers to put their money in the stocks that are working, stocks like those in his COVID-19 Index. He said PepsiCo (PEP) - Get Report yields 3%, has a strong balance sheet and a strong secular trend. Broadcom (AVGO) - Get Report is making its own destiny on the heels of the 5G wireless revolution. And Apple (AAPL) - Get Report has been able to reinvent itself from a hardware company into a services juggernaut.
Investors should prepare to start buying tomorrow, Cramer concluded, even though the selling is likely to continue.
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Don't Be Distracted by Momentum
Live by momentum and you'll die by momentum, Cramer cautioned viewers. Over the past few weeks we've seen recent buying in the travel, retail and the oil stocks, and Cramer said the culprits have been new, inexperienced investors.
New investors want to see quick gains, so they forego index funds for whatever individual stocks are going up the most. And since stock splits are a thing of the past, these investors tend to stick with stocks that trade for less than $10. With so many investors crowded into a limited number of stocks, and none of them knowing how to read a balance sheet, it's easy to see big gains in a short amount of time.
That's how you get cruise lines surging even though they remain shuttered until at least July. That's how the airlines rally even though they're taking government assistance to survive. And that's how low-dollar oil stocks surge in the middle of a global recession.
Executive Decision: PVH Corp.
In his first "Executive Decision" segment, Cramer spoke with Manny Chirico, chairman and CEO of apparel maker PVH Corp. (PVH) - Get Report, which saw its shares plunge 11.5% on a major earnings miss as most retailers were closed.
Chirico said it's time to start calling things like they are. 2020 will be a mess of a year and there will be no "business as usual." The best they can hope to do is manage their cash and inventory and get through to the fall and into 2021 when things will begin to meaningfully recover.
The analysts shouldn't have been surprised at PVH's earnings miss, as their only "clean" month was February. By March, apparel sales hit a wall and in stores that have reopened, sales remain down 25% on average. Additionally, Chirico said that stores that are open don't need to restock as much, and PVH is committed to not stuffing their channels with excess inventory.
PVH has also been standing with their employees, with Chirico and his management team foregoing their salaries in a sign of solidarity. Chirico also spoke out on the racial injustice in our country, saying that everyone, including PVH, can and must do better.
Cramer said PVH should be bought, as it's going to be the survivor in this group.
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Executive Decision: L3Harris
Brown said the merger has given his company a broad portfolio of missions, a terrific leadership team and cost synergies that are providing a lot of free cash for shareholders. He said the mission for defense contractors is shifting away from large conflicts and into smaller missions. Those new missions all require resilient communications that are cross-connected to other platforms.
Brown noted that while their commercial business, which includes aerospace and public safety, was down 5% for the year, they continue to evaluate all of their business units and will divest if needed. He said there is still value in their commercial units.
Finally, Brown said L3Harris remains committed to its shareholders. The company has a strong balance sheet, is well capitalized and will return cash to shareholders in the form of dividends and stock buybacks.
On Real Money, Cramer keys in on the companies and CEOs he knows best. Get more of his insights with a free trial subscription to Real Money.
Executive Decision: Adobe Systems
For his final "Executive Decision" segment, Cramer checked in Shantanu Narayen, chairman, president and CEO of Adobe Systems (ADBE) - Get Report, the cloud software provider that just posted a 13-cents-a-share earnings beat on a 14% rise in sales.
Narayen said Adobe's strength comes from the diversity of their product portfolio. As the world moved from the office to the home, Adobe's products were used by individuals and businesses alike to tell their stories. The company's digital media business has also been strong.
Narayen said their hearts go out to the millions of small and medium businesses that have suffered so much through this pandemic. He said it's vital that we get these businesses reopened in a safe way.
Adobe also remains committed to digital literacy for children. Narayen said without skills for the digital world, students are at a disadvantage, which is why Adobe is helping millions of students tell their stories, share and collaborate in new ways.
Here's what Jim Cramer had to say about some of the stocks that callers offered up during the Mad Money Lightning Round Thursday evening:
Smith & Wesson Brands SWBI: "This stock is up a lot but I don't have a reason to own it."
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At the time of publication, Cramer's Action Alerts PLUS had position in COST, AMZN, AVGO, PEP, AAPL.