A lot of people are leaning into tech when they should be leaning out of the sector, Jim Cramer said on TheStreet.com TV's Wall St. Confidential video Wednesday. Case in point: Rackable Systems ( RACK) and others that are suffering from the seasonality of tech. Although Cramer doesn't believe that the stock's component shortage is a big deal, he told Wall St. Confidential host Aaron Task that its "intense competition" is a red flag. However, the most important thing here, Cramer said, is that Rackable is signaling that investors have to make some sales in tech now. "The accentuated decline in Rackable has much more to do with seasonality than with weakness in its business," Cramer said. Regarding Intel ( INTC), Cramer said that investors need to understand that the stock trades off of gross margins. Intel has a new chip coming out, and Cramer believes that the chip won't get to a 90% to 95% acceptance rate until next year, when Intel has finished making its initial mistakes with the new product run. So gross margins will not increase for the time being, and Intel "cannot be owned," he said. However, Cramer reassured viewers that news from Rackable and Intel doesn't change his bigger-picture thesis that tech should outperform in 2007. "Where we are right now in the calendar has been traditionally when people begin to pare back tech," Cramer said.
At the same time, Cramer said he believes market players should buy Hewlett-Packard ( HPQ), which he owns for his charitable trust,
Action Alerts PLUS, because it is a principal beneficiary of Microsoft's ( MSFT) Vista operating system. He also believes that if Cisco ( CSCO) pulls back to $25 or $26, investors should consider getting into it because of the "incredible ramp" in cable. "If you have a product cycle, I think you can ride out the seasonable weakness," Cramer explained. Apple ( AAPL) is an example of a stock whose seasonality Cramer doesn't fret. If Apple is down, it's a gift, and that's all there is to it, Cramer said. He called Apple a "secular growth story and product cycle story," which allows it to break away from seasonality. In the financial sector, Cramer stressed JP Morgan ( JPM) as a buy, based on its "terrific credit card growth," and added that Capital One Financial ( COF), which he owns for his charitable trust, is one of the most hated stocks he's ever seen. He said there is a "tremendous" January $75 put buy in Capital One here. If Capital One reports a disappointing quarter, the puts will act as a trampoline, Cramer said. Further, Cramer said he'd take some profits in airlines and buy them again. Cramer believes that the industry has become investment-worthy again and said he likes the group.
In addition, Cramer likes UPS ( UPS) in the transports and considers the rails a buy on any pullback because of the infrastructure problems surrounding the trucking sector. Cramer also said it was a big deal for Goldman Sachs to upgrade Procter & Gamble ( PG) and said if the stock wasn't trapped by a strike, it could go to $67 or $69. "There's also money coming out of other soft goods -- notably cereals -- because people are worried about corn," he continued. "They're looking for good plays and going to Procter and Colgate ( CL) instead. But I like Procter better." However, people should remember that only 3% to 4% of a box of cereal is made up of corn, so perhaps it's too early to leave Kellogg ( K) and General Mills ( GIS), Cramer said. Discussing oil, Cramer said that in the past seven months the Oil Service HOLDRs ( OIH) has become a good forecaster of oil prices. The OIH is "trying to make a bottom here," but Cramer said he hasn't made the call yet because it is an "easily manipulated index." He urged people to take gains in Caremark ( CMX) and said that in the whole drugstore business, he just wants to own Rite Aid ( RAD). Cramer also recommended buying Comcast ( CMCSA) as he believes that the stock is "headed dramatically higher," and Time Warner ( TWX), which he feels is undervalued at $22.