Pessimism among investors shouldn’t deter people from carefully buying shares of high-quality companies that have endured massive declines, CNBC’s Jim Cramer said Friday after a widespread sell-off in the stock market.
On Thursday, survey results from the American Association of Individual Investors showed that pessimism among retail investors was at its worst in some 5½ years, a symptom of the market’s volatility in recent months.
But Cramer, a longtime stock-picker whose mantra is “there’s always a bull market somewhere,” urged investors “to think a little more long-term.”
That means investors have to be exceedingly careful and choose their buys wisely, the “Mad Money” host said, choosing the stocks of Adobe, Costco and Johnson & Johnson to illustrate his point.
“If you bought any of those stocks yesterday, you’d say, ‘Wow, that had to have been the worst financial decision I’ve ever made,'” he said after all three stocks closed dramatically lower. “Adobe and Costco must’ve had shortfalls. […] The J&J story about the company knowing about asbestos in talc? Dreadful.”
But stock-pickers who are open to a wider frame of reference for these stocks — say, several months rather than several weeks — might have an easier time rationalizing why these stocks look “cheap” here, Cramer explained.
“In reality, … Adobe reported a terrific quarter, but the stock had already run up dramatically. Same with Costco. People just assumed the numbers were bad, though, because the stock went down. There was no rigor to the process at all. In short, Adobe and Costco are broken stocks, but they’re not broken companies,” he said.
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The stock market’s staggering declines may not be over, but steel-stomached investors might still find some worthwhile stocks to buy if they’re careful and know where to look, Cramer said Friday.
“[This] is a treacherous market. It is a mean market. It is an angry market. It reacts horribly to even the slightest bit of troublesome news. It doesn’t even like good news. We now sit at the lowest level since April and I don’t think we’re done with the decline,” he warned after the Dow Jones Industrial Average plunged nearly 500 points.
However, “there are bargains being created. You’ve just got to know where to look for them. The problem is there are just not enough to do the job” of reversing the market’s bearish moves, Cramer said.
Now, Wall Street is approaching a “peculiar junction” ahead of the Federal Reserve’s meeting next week, at which the central bank’s leadership is widely expected to raise interest rates by a quarter-point, Cramer said.
Reiterating his concern about a lot of economic indicators sending conflicting signals, Cramer suggested that Fed Chair Jerome Powell taking a data-dependent, wait-and-see approach instead of hiking rates again.
“The smartest thing Jerome Powell could do here would be to wait another month or two to see which of these indicators are telling the truth, … especially when we know that there will be tens of thousands of layoffs in retail alone a month from now,” he said. “Unfortunately, Powell wedded himself to a rate hike this month and now he can’t back down, not without making the Fed look toothless.”
With that in mind, Cramer turned to his game plan for the week ahead. Click here to see the full rundown.
The new partnership between coffee giant Starbucks and Uber’s delivery division, Uber Eats, came around in part because of Uber’s continued efforts to improve its culture, Uber CEO Dara Khosrowshahi told CNBC on Friday.
In a joint “Mad Money” interview with Starbucks President and CEO Kevin Johnson, Khosrowshahi told Cramer that “culture work is never done.”
Still, he said, he believes Uber is in a stronger position now than last year, when Uber’s founder and former CEO Travis Kalanick resigned amid ongoing revelations about widespread problematic behavior throughout the company and its upper ranks. When Khosrowshahi took over, he vowed to repair the company’s “moral compass.”
Click here to read more about their interview.
Cloud-based identity protection company Okta competes with similar offerings from giants like Microsoft with its “neutrality,” the company’s co-founder, Chairman and CEO Todd McKinnon told Cramer in a Friday interview.
“The big difference between us and a company like Microsoft is we don’t have a particular platform that we’re trying to connect users to,” McKinnon said. “We want to connect users to every technology that’s the best for them, whether it’s Salesforce or Workday or Amazon Web Services or Google or Office 365. So our value to customers is about neutrality.”
That enables Okta, which reported better-than-expected earnings results earlier this month, to help new clients like privately-held grocery chain Albertsons run an online platform for its customers to redeem coupons, the CEO said.
Click here to learn more about what Okta does and watch McKinnon’s full interview.
Health insurance giant Centene may have been one of the biggest beneficiaries of the 2018 midterm elections, in which Democrats regained control of the House of Representatives and brought some balance back to Congress.
Chairman and CEO Michael Neidorff supported that idea in a Friday interview with Cramer after Centene’s analyst day, saying that “everybody” in a bipartisan panel he hosted “was saying we’re in the best position for anything that’s going to happen, and we’re talking on both sides of the aisle.”
A market leader in terms of revenue in the four largest Medicaid-affiliated states — California, Texas, New York and Florida — Centene has a unique look into the state of U.S. health care. Today, it’s “saving the states a lot of money” while “improving the outcomes” for patients, Neidorff said.
Click here to watch his full interview.
In Cramer’s lightning round, he zoomed through his responses to callers’ stock questions:
The Children’s Place Inc.: “Children’s Place is in a bear market. There’s a big retail bear market going on. That quarter wasn’t that bad. This stock is now down 67 straight points. But I’ve got to tell you, it’s probably not done going down. But they are a good company, so if you want to start buying some, you’re certainly not buying it at the top.”
Bank of America Corp.: “No, [now’s not the time to double your position]. At $20, you’ll buy more. At $20, you’ll buy more Bank of America. The banks are in a bear market and we’re going to use very wide scales to buy it. Next stop: $20. That’s where you pick it.”
Disclosure: Cramer’s charitable trust owns shares of Johnson & Johnson, Microsoft and Salesforce.
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