RealMoney Radio Recap: Circle the Wagons

Cramer says this market is forcing a defensive and commodities-based portfolio. Also, less tough on tech.
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"Having a big SUV was always an expensive affair, but it was big, roomy and it made you feel safe," Jim Cramer told his

"RealMoney" radio show listeners Monday.

But paying $100 to fill your tank is a far cry from $50 to $60, and people nationwide are cutting back on spending to account for this increased and onerous cost, he said.

How does he know that consumers are cutting back? Look no further than recent earnings and sales results from the nation's biggest retailers including

Lowe's

(LOW) - Get Report

and

Home Depot

(HD) - Get Report

, he said.

Next week,

Best Buy

(BBY) - Get Report

could be the next big-box store to feel the pinch, just as

Target

(TGT) - Get Report

already has, he added.

In this environment, Cramer said that the market would traditionally move to defensive, consumer-oriented plays -- including

Procter & Gamble

(PG) - Get Report

,

Merck

(MRK) - Get Report

and

Pfizer

(PFE) - Get Report

-- meaning companies that do not need a strong economy to survive.

These companies make products that people buy to stock their medicine cabinets and refrigerators, he said, noting that we have to spend on these items whether the economy is hot or not.

However, the market hasn't been behaving as it should lately, said Cramer, and these big defensive names aren't necessarily doing well. Stay away from the big drug and beverage plays he said, suggesting instead companies like

Wrigley

(WWY)

and

Cadbury Schweppes

(CSG)

.

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The companies that are doing well are making products that are not that expensive, he said, noting that

Wal-Mart

(WMT) - Get Report

has been strong even as the market fell for 10 straight days.

He said that commodities like gold and copper are still declining, but that this is in some part due to the fact that they ran to unsustainably high levels. He often tells listeners to buy strength and sell weakness, and he recommended doing so in this sector, too.

Cramer said that he would "circle the wagons" around a couple of good commodities stocks and some defensive stocks in order to put together a diversified portfolio. This is the strategy that he has used to create his charitable trust

Action Alerts PLUS.

Global Concerns

The drop in the U.S. market has had a ripple effect so vicious as to cause tremendous confusion worldwide, said Cramer.

Even stocks in the big emerging markets of Brazil, Russia, India and China -- the BRIC countries -- have felt the pain, said Cramer; but he said that if listeners divide the emerging markets into two parts, they'll have a better shot of avoiding huge losses.

He said that the first group is Latin America, including Brazil, Argentina, Chile and Columbia, which has been an unbelievable place to invest for the last two years.

While he was once bullish on the region, he now believes that things have "gone awry" in places like Peru, Ecuador, Venezuela and, even to a certain extent, in Brazil, because political risks are heating up as the region takes on a more socialist tone.

But areas in Asia including Korea, India, China and Japan are also feeling the troubles that U.S. stocks are feeling, even though there is far less political risk there.

So, Cramer said to stick with this part of the emerging market map, and to wait until June before deciding whether Latin America is stable enough to invest in. In Asia, he said that he would take a look at

Tata Motors

(TTM) - Get Report

, a big Indian automaker.

He cautioned investors to be careful in emerging markets, no matter where they may be on the globe, because this is a very anti-speculative time for investors.

Emerging markets are speculative places to invest, he said, adding that the

Federal Reserve

is creating an anti-speculative world by raising interest rates and making it more expensive to borrow money.

The Fed crushed speculation in 2000 and 2001, and took everyone down, he said, adding that the only way to avoid getting hurt in this environment is to be diversified.

If you have a food and drug stock, a mineral and mining stock, a machinery play and an aerospace or defense stock, you will be hurt less than other people, he said. His own

Action Alerts PLUS portfolio, which he runs to make money for charity, is an example of a diversified portfolio. This is why he said it was less hurt than many others when commodities and mineral stocks sank last week.

No one has ever benefited in the stock market from panicking and throwing everything away, he said, telling listeners to benefit from his experience and to stay calm.

The panickers are in control of stocks now, but that doesn't mean that the market is dead, he said. He believes that one reason the selloff has been so sharp is due to the fact that people who borrowed money to buy stocks had to abruptly bail as their losses became more serious.

Borrowing money to buy a house is OK, he said, but borrowing to buy stocks is "the height of foolishness."

He added that oil stocks are likely looking for a bottom in this environment, and that he would be interested in a company like

BP

(BP) - Get Report

, because it is down 15% and has a 3.75% yield. It joins

Chevron

(CVX) - Get Report

as a company that he believes is interesting and probably a good buy at these levels.

However, Cramer said not to be aggressive in one's buying, because you can never be sure whether a market has bottomed. He said that he would carefully choose a stock, and then begin building a position in small increments.

Cramer's Callers

Even in this down market, lots of listeners called in to talk Cramer.

Cramer told the first caller that

Qualcomm

(QCOM) - Get Report

is among the handful of tech companies he would consider buying at these levels. He owns the stock for his charitable trust

Action Alerts PLUS.

Cramer believes that tech is getting its footing and that he's interested in companies that reported good earnings even amid a huge market selloff.

But he would stay away from

Intel

(INTC) - Get Report

,

Cisco

(CSCO) - Get Report

and

Dell

(DELL) - Get Report

.

However, Cramer would be interested in Qualcomm and

Advanced Micro Devices

(AMD) - Get Report

.

A caller said that he likes the fundamentals behind

Hewlett-Packard

(HPQ) - Get Report

and was considering buying the stock on weakness. Cramer liked that idea, adding that "even the good stocks do not hold up under this kind of onslaught."

He said that many people are afraid of buying anything right now because they've heard that the market is bad. However, Cramer said that this is also an opportunity to cheaply buy solid stocks such as H-P.

Like Qualcomm, Cramer said that H-P's business is very strong. He would also use this bear market as an opportunity to buy small amounts of companies such as

Marvell Tech

(MRVL) - Get Report

and

Brocade

(BRCD)

.

Cramer said the he believes that oil and oil services stocks are bottoming, and that he would take a closer look at

ConocoPhillips

(COP) - Get Report

.

However, he cautioned that it's foolish for anyone to believe that they know when a stock has bottomed, so he would buy any stock in small increments.

Too often we've seen the market overshoot to the downside, he said. So even though "ConocoPhillips may be the single best oil company out there today" and one of the most shareholder-friendly, Cramer said he would buy some common stock and then hope the price comes in a bit.

If it does, he said he would then be willing to pick up more shares or buy an options strategy.

A caller said he just sold all of his

JDSU

(JDSU)

for a nice profit, and was wondering whether he should go in and buy some more now that the stock has fallen.

Cramer first congratulated the caller for buying low and selling high, and added that he is not as fond of JDSU as he once was.

He said that the company reported a good quarter, but also issued a convertible bond. This means that the company has issued more debt, similar to taking out a second mortgage.

The company didn't need to do this, he said, but the fundamentals are still good and business is strong. With the price cut in half due to the selloff, he said he would consider buying more JDSU.

Cramer also said he would be interested in

Corning

(GLW) - Get Report

if it falls below $20 from its current price just below $23, as well as

Conexant

(CNXT) - Get Report

.

Finally, Cramer told a caller that

Abercrombie & Fitch

(ANF) - Get Report

was taken down by bearish comments from Lowe's.

Management at the retailer said some negative things about how they perceive the retail landscape, and the company joined big-box stores Home Depot and Target in saying that business is not that good.

But Abercrombie still reported a great quarter, and Cramer likes the stock. He said not to be worried about the fact that people are pulling out of the teen retailer in order to buy established retailers such as Target and Lowe's on the cheap.

At the time of publication, Cramer was long Qualcomm.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for

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