Selloffs like we saw Thursday are a lot easier to swallow when you have some cash on the sidelines, Jim Cramer reiterated to his Mad Money viewers Thursday. Investors who took profits and had cash on hand didn't mind today's selloff as much as those who remained fully invested, Cramer said. That's why cash is king.
Why should investors take profits when they have big gains? Cramer said discipline always trumps conviction. Conviction is how you make money, he said, but discipline is how you keep it. No matter how much you love a stock, when you have big gains, you have to sell.
There are many reasons to stash some cash in your portfolio. First, we're now in September, a historically bad month for the stock market. Second, according to the technical analysis offered on Wednesday night's show by Carley Garner, the risks are rising.
Third, there's heightened frustration brewing in Washington, D.C. over additional stimulus that is desperately needed by small businesses. Without it, our economy could be in for a very rough ride.
Fourth, Cramer said we're seeing a lot of overvalued stocks, even after today's decline. That is amplified by reason No. 5: big slumps in sectors like oil and the banks, which have not recovered at all since the pandemic began.
For all of these reasons, Cramer urged investors to stay disciplined, take profits and keep plenty of cash on hand.
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Investing in What You Know
There's been a big disconnect in the stock market recently, Cramer told viewers. On one hand, the big money managers have been sounding the alarm that stocks have gotten far too expensive. But on the other hand, individual investors and the Robinhood crowd have made fortunes. What's the disconnect? Cramer said he's finally figured it out.
The big money managers have simply gotten too big, Cramer explained. They don't care about individual stocks, they can only talk in terms of the big picture, like the indices, bond markets and currencies. Individuals, on the other hand, can trade in and out of individual stocks with ease and that's exactly what they've been doing.
It's not hard to invest in the things you know. That explains the rally in Apple (AAPL) - Get Report, Amazon (AMZN) - Get Report, Microsoft (MSFT) - Get Report and Chipotle Mexican Grill (CMG) - Get Report. Stocks like Nvidia (NVDA) - Get Report may seem expensive at 54 times earnings, but in the "out years," the estimates are likely to be too low, making this Cramer favorite inexpensive at current levels.
Executive Decision: RH
In his first "Executive Decision" segment, Cramer welcomed back Gary Friedman, chairman and CEO of home furnishings retailer RH (RH) - Get Report, which delivered a surprise earning beat this quarter.
Friedman said the RH continues with their strategy of building an ecosystem of product, places, services and spaces that amplify their brand. So while they've been able to benefit from short-term changes in behavior caused by the pandemic, they remain focused on their long-term plans.
Friedman said that many people see RH as an overnight success, but what you see now is the culmination of decades of hard work. He said if you do remarkable things, you'll find ways to monetize it. And as the saying goes, luxury goods are the only place where you can make luxury margins.
When asked about the death of brick-and-mortar retail, Friedman said that retail stores aren't dead, they're just soulless boxes that lack imagination. By creating inspirational spaces, retailers can do amazing things, he said. That's how RH shares have been able to grow 323% over the past five years.
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Executive Decision: nCino
For his second "Executive Decision" segment, Cramer also spoke with Pierre Naude, chairman and CEO of nCino (NCNO) - Get Report, the financial cloud software IPO that has rallied 171% since coming public just two months ago. Shares of nCino soared 6.4% today after the company reported its first earnings as a public company.
Naude said that as companies accelerate their digital transformation and more people are working from home, the need for nCino's billing and accounting software has never been greater. He said their total addressable market is $10 billion.
nCino works with banks big and small, Naude added, with offices around the globe. The company's platform helps banks onboard customers, originate loans and open new accounts, taking care of all the compliance requirements in the process. The company is also adding a new layer built on artificial intelligence and analytics to help make better loan decisions.
Naude said nCino has also been a big supporter of small businesses, helping many to facilitate their government PPP loans to weather the pandemic.
Executive Decision: Sage Therapeutics
For his final "Executive Decision" segment, Cramer checked in Dr. Jeff Jonas, CEO of Sage Therapeutics (SAGE) - Get Report, the biotech working to treat depression and other illnesses. Shares of Sage closed up 5.1% Thursday.
Jonas said that depression has always been the focus at Sage. Depression has increased two-to-three times during the pandemic and we need to treat mental health with as much vigor as we do other illnesses. People need to be able to function and get back to work and back to their families, he said.
Sage is also working on new treatments for diseases like essential tremor, something that affects up to six million patients in the U.S. yet hasn't seen a new treatment in over 30 years. Jonas said patients shouldn't have to live with tremors that limit everyday tasks.
Drug development is a roller coaster, Jonas said, when asked about their setback late last year. He said they learned a lot during the process and have emerged in great financial shape with a broad pipeline of other opportunities.
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:
ON Semiconductor (ON) - Get Report: "The best 5G player is Marvell Technology (MRVL) - Get Report, then Qorvo (QRVO) - Get Report and then Skyworks Solutions (SWKS) - Get Report ... this one does not fit in."
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At the time of publication, Cramer's Action Alerts PLUS had a position in AMZN, MSFT, NVDA.