"Remember when the movie
came out and it spooked the living daylights out of you?" Jim Cramer asked his
"RealMoney" radio show listeners Friday.
Some people never got back into the water again after the movie, and he said that the financial equivalent of that fright is happening in the stock market right now.
The last eight days have been hideous, said Cramer, due in large part to the fact that the
seems set to raise interest rates.
He said that the downfall began Wednesday when a government report hinted at inflation.
But it's not merely inflation that encourages the central bank to raise interest rates, he said. It's speculation. When there is speculation in the market, as there has been in real estate in the 1980s or in the dot-com rush of 2000, then the Fed raises rates to encourage people to keep their money out of these sectors, he said. Higher rates make it more attractive to keep money in the bank.
Now we have a situation where tech, financials and health care have bottomed, Cramer said. Machinery is trying to bottom, so he is picking at these stocks for his charitable trust
Action Alerts PLUS.
But he's still worried about oils, materials and mining. We haven't found a bottom, he said, and these are the sectors that the Fed wants to cool off because they have been so hot.
"When I see this happening, I like to circle the wagons around the stocks I feel the best about," Cramer said. He suggested selling off the weaker stuff, but added that he doesn't mind buying a little in sectors that are in freefall, so long as he believes they will rise again. He said he would look at
, which had some of the best earnings in their respective sectors.
Buy a little here with the idea that you're not done buying, he said.
Turning Toward Tech
"As I scour the landscape for crushed stocks, I keep seeing that this tech group keeps trying to put in a bottom," Cramer said.
Among the stocks he sees that have come down a lot, but have reported good news, he includes
Advanced Micro Devices
have already moved higher again, but he said that the good news can't be ignored.
However, he said he would wait for weakness in these two stocks but would not hesitate to buy should the prices come down.
One of the reasons he likes AMD so much is that
has finally decided to switch to their chips from
"Bulls make money. Bears make money. But hogs get slaughtered." Cramer said that this is the most important piece of trading advice that he has to give.
For example, he said that he bought
( PCU) at $86, and then continued to buy the stock in pieces as it fell to $79, $78 and $77. People were getting killed and people were furious with him, but he stuck by his strategy of buying into weakness.
As the stock turned higher, he then started to sell it in steps. The Communists lost the election in Peru and the price of copper almost doubled, two events that boosted the stock. As the tide turned, he sold the stock that he bought at $86 for $90. He sold the stock that he bought in the $70s when it was in the $90s. Finally, he sold the last of his position when the stock hit $100.
But the stock jumped to $106 after he had sold the last of his shares, and he said that he was kicking himself. But a week later, commodities prices crashed and if he had held on at $106 and beyond, he would have given up nearly all of his gains, he said. It was worth it, he said, to not get that last $6 because he locked in a decent profit.
The first listener to call on Friday wanted to know about
The caller said she bought the stock in the high-$20s, sold it at $35 and wanted to buy more on this dip. However, Akamai has already started coming up again and she asked if it is too late to buy more.
"The opportunity to buy Akamai has come and gone," Cramer said. The stock was $31 on Wednesday, but now that it's up to $34 he said he would stay away.
In selloffs like this, he said that people should never buy up. Tech stocks have bottomed and so some are lifting off again, he said. However, machinery is now trying to find a bottom, so he would think about looking around in that group. He added that oil and oil services are still in freefall, but that he doesn't mind buying a little there if he believes the company will move higher once it bottoms.
Dun & Bradstreet
"the quintessential company that does well in a slowdown" because people use its product to reduce credit risk.
This stock goes up when the
raises interest rates, he added, which is why it's close to its 52-week high and did not go down in this selloff. He believes the stock is a buy.
He said that
, which he owns for his charitable trust
Action Alerts PLUS, is one of best-performing stocks he has ever seen. This is why he just bought a little more.
A lot of people did things in options that weren't right, and this could cause earnings to be restated, he said, adding that he sees a 12-cent restatement.
But he said that the company has a lot of firepower to buy back stock, and that the worse thing that could happen is that the chief executive, William McGuire, will have to leave and give money back to the company. He said that, for him, it made sense to pick up more of the stock now that it's at a 52-week low and down 27% year to date.
He told a caller that
is growing at 33% and sells at 39 times earnings.
"I would be willing to pay 60 times earnings," he said. The stock has been hideous, but he believes there is nothing wrong with the company.
To get your mind around the stock, it makes it easier to divide it by 10 and think about it that way. Instead of looking at it as a $440 stock that fell to $370, which is difficult to swallow, he said to think of it as a $44 stock that has gone to $37.
Even though he believes Google will go higher, he said that he wouldn't buy it until it reaches $350.
He said that
is a winner and that the company has solid fundamentals.
The stock is hurting, he said. But that like Google and
, he said the fundamentals are intact, so he wouldn't give up on it.
, he said that it is about to launch a new asthma drug, and that this should lift the stock price.
Everything has been going down, so this stock is going down too, said Cramer, adding that he would think about buying this stock in steps as it falls because it should move higher.
He said that
( KRY) is a good story, but that gold prices have fallen precipitously and taken all related stocks down with it.
It doesn't matter which gold stock you own if the sector is bad, he said. However, gold prices could move higher again. With the market so bearish, he said that he would circle the wagons and only buy the highest quality plays. Crystallex is a bit speculative, he said, so if he had to buy the stock, he wouldn't buy a lot here.
has gone up since he recommended it, and while he still likes the stock, he told a caller that the smart play would be to wait for weakness before buying it again.
"One of the things we learned this week is that stocks go down," he said. If you buy all of your Boeing position now and it falls, that would be a mistake. Cramer added that it is smarter to be patient and wait for a pullback before buying more.
Cramer agreed with a caller that diversification is the best sort of portfolio to have and that
Procter & Gamble
is the sort of consumer goods company that is important to have in bear markets like this one.
The company sells the sorts of consumer products that people still buy regardless of ups and downs in the economy, but he said that Procter may not be the best pick for a diversified portfolio.
The company reported "a not great quarter," Cramer said, adding that the Gillette unit is not doing that well.
He said that he sold all of the Procter in his
Action Alerts PLUS portfolio because the company's fundamentals were not as strong as he thought, saying that he sacrificed it to put money to work in better stocks.
He said he would look at
( SGP) instead, which he has been buying for
Action Alerts PLUS, or at
as a good alternative to Procter.
At the time of publication, Cramer was long Schering-Plough and UnitedHealth.
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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