CNBC’s Jim Cramer said Monday that investors shouldn’t fear the latest market rotation. Instead, he thinks it’s creating buying opportunities in several high-quality stocks that have been pulled lower by institutional selling.
“If you can spy a rotation and figure out what the theme might be, you can identify some incredible bargain stocks,” the “Mad Money” host said.
Monday’s action followed last week’s June jobs report, which pointed to a slowdown in hiring from the prior month. Cramer said that prompted some large money managers to reposition their portfolios. Because many institutional investors trade baskets of stocks tied to a particular economic theme, he said, quality companies can get swept lower even when nothing about their business has changed.
“These rotations create dislocations that seem to come out of nowhere. And sometimes those dislocations can give you incredible opportunities to buy high-quality companies at a discount,” he said. “Today we got a bunch of them.”
Cramer pointed to PepsiCo, saying the recent pullback has erased much of the rally that followed its strong earnings report last quarter and created an appealing entry point ahead of the company’s July 9 results.
He made a similar case for Starbucks, arguing investors are finally getting an opportunity to buy the stock after its recent decline as CEO Brian Niccol continues working on the company’s turnaround. Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club, owns shares of Starbucks.
For investors willing to take on more risk, Cramer highlighted Constellation Brands. He said the alcohol company’s recent earnings suggested its beer business may be stabilizing despite continued concerns surrounding spirits.
Cramer said he “can’t think of a more advantageous place to buy” TJX Companies, another Club holding. He argued a weaker consumer tends to benefit off-price retailers as shoppers trade down, while excess inventory at traditional retailers gives TJX more discounted merchandise to sell.
Away from consumer stocks, another dynamic that characterized Monday’s action was a rebound in artificial intelligence winners at the expense of healthcare stocks that had been doing well. That includes Club holding Johnson & Johnson. Cramer said the company is now a “pure-play pharma” after spinning off Kenvue, its consumer health business, a few years ago and it’s planning a move away from orthopedics. He said those changes make it a more attractive business ahead of its July 15 earnings report.
“The stocks of J&J, Pepsico, Starbucks, Constellation Brands, and TJX all took it on the chin today,” Cramer said. “I think this is a great place to do some buying, because they’re all collateral damage from this indiscriminate, sector rotation selling.”
