Comparisons can sometimes be odious, especially when they keep you from buying great stocks, Jim Cramer told his Mad Money viewers Wednesday. There are plenty of pundits that will tell you stock picking is a fools game, but nothing could be further from the truth.
When the market cap of Tesla (TSLA) – Get Tesla Inc Report surpassed that of Ford Motor (F) – Get Ford Motor Company Report, the pundits were out in force telling investors that, obviously, Tesla was overvalued. But had you followed that advice, you would have missed out as Tesla shares surpassed that of General Motors (GM) – Get General Motors Company Report, and Toyota (TM) – Get Toyota Motor Corp. Report and then all three combined.
Over on Action Alerts PLUS, Chris Versace and Bob Lang are looking closely at CPI data showing inflation taking a bite out of consumer dollars. “Needless to say, we see that sobering view as a positive for the portfolio’s holdings in Amazon (AMZN) – Get Amazon.com, Inc. Report and Walmart (WMT) – Get Walmart Inc. Report.” Get in on the conversation and find out what they’re telling their investment club members on Action Alerts PLUS.
Then there’s the pundits’ obsession with the Federal Reserve, where they insist that rising interest rates will destroy our economy. But Tuesday, we heard from Fed chair Jay Powell that he’s not out to wreck the economy, he’s taking a common sense approach to monetary tightening.
The pundits will always tell you that buying the dips is stupid and that index funds are far better than individual stock picking. But in reality, isn’t buying at lower prices what you’re supposed to do? And if individual stocks are bad for you, how is a basket of them suddenly good for you?
When you’re a pundit, it pays to be bearish. If you’re a bull, and you get it wrong, you’ll be chastised forever. But if you’re bearish, well, you’re just being cautious.
Cramer told viewers they should have a list of stocks they want to buy, and the prices they want to pay, at the ready. When their stocks reach those prices, “buy them,” he said. You’ll never make money in the stock market if you’re too scared to buy.
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Am I Diversified?
In the “Am I Diversified” segment, Cramer spoke with callers and responded to tweets sent via Twitter to @JimCramer to see if investors’ portfolios have what it takes for today’s markets.
The first portfolio included Apple (AAPL) – Get Apple Inc. Report, Coinbase (COIN) , Ford Motor (F) – Get Ford Motor Company Report, Invitae (NVTA) – Get Invitae Corp. Report and PayPal (PYPL) – Get PayPal Holdings, Inc. Report. Cramer suggested selling both Coinbase and Invitae and adding UnitedHealth Group (UNH) – Get UnitedHealth Group Incorporated Report and Honeywell (HON) – Get Honeywell International Inc. Report to be a stronger portfolio that’s better diversified.
The second portfolio’s top holdings included Southern Company (SO) – Get Southern Company Report, Verizon (VZ) – Get Verizon Communications Inc. Report, ConocoPhillips (COP) – Get ConocoPhillips Report, Philip Morris (PM) – Get Philip Morris International Inc. Report, and Union Pacific (UNP) – Get Union Pacific Corporation Report. Cramer blessed this portfolio as properly diversified.
The third portfolio had Apple, ThermoFisher Scientific (TMO) – Get Thermo Fisher Scientific Inc. Report, Ford Motor, McDonald’s (MCD) – Get McDonald’s Corporation Report and Rocket Lab (RKLB) – Get Rocket Lab USA, Inc. Report as its top five stocks. Cramer said this portfolio was “perfect.”
The fourth portfolio’s top stocks were Microsoft (MSFT) – Get Microsoft Corporation Report, Ford Motor, Apple, Boeing (BA) – Get Boeing Company Report and BP BP. Cramer said he’d allow both Apple and Microsoft to coexist, so this portfolio is properly diversified.
ViacomCBS too Cheap to Ignore?
We’re starting to see signs that ViacomCBS (VIAB) – Get Viacom Inc. Class B Report has gotten its act together and the stock might finally be a buy, Cramer told viewers. In fact, trading at just nine times earnings with a 2.7% yield, Viacom has become too cheap to ignore.
For much of last year, the stock of Viacom was untouchable, as the company suffered from a price manipulation scandal. But now that we’ve rung in the new year and the company has gotten its act together, Cramer said there’s a lot to like about this media powerhouse.
When ViacomCBS reports in a few weeks, it will be the first full quarter with an NFL football tailwind. The company’s Paramount+ streaming service is also gaining steam, and Viacom’s existing library of movies and series is also in high demand.
ViacomCBS is only now starting to receive some attention from the analysts, but Cramer expects to see a lot more as their scandals fall further into the past. With a 2.7% dividend, the stock pays you to wait to hear what the company has to say when it next reports earnings.
Executive Decision: Devon Energy
In his “Executive Decision” segment, Cramer spoke with Rick Muncrief, CEO of Devon Energy (DVN) – Get Devon Energy Corporation Report, the best performing stock in the S&P 500 last year that still trades for just 10 times earnings.
Muncrief said that Devon’s merger with WPX has been going very well and given the combined company terrific assets and terrific people that continue to impress. Their new business model, which includes a variable dividend and a share buyback program, has also been very well received.
Muncrief noted that in years past, oil drillers were compensated for growth, which is why you saw so much volatility. But even before the pandemic, oil producers were becoming more disciplined, offering stability and far less volatility. Those trends only accelerated after COVID.
Devon is currently only 25% hedged in 2022, leaving the majority of their oil free to take advantage of continued price increases. Devon is also continuing to realize synergies from their merger.
Devon also has a focus on sustainability. Muncrief said they’ve deployed a lot of new technologies to cut their emissions and reduce flaring, and they will continue to do more every year.
Lightning Round
In the Lightning Round, Cramer was bullish on Prothena (PRTA) – Get Prothena Corp. Plc Report and Rio Tinto (RIO) – Get Rio Tinto Plc Report.
Cramer was bearish on Chargepoint (CHPT) – Get ChargePoint Holdings, Inc. Class A Report, Squarespace (SQSP) – Get Squarespace, Inc. Class A Report, Vale (VALE) – Get Vale SA Report, Alibaba (BABA) – Get Alibaba Group Holding Ltd. Report and QuantumScape (QS) – Get QuantumScape Corporation Class A Report.
Why Techs May Be the First to Rally
In his “No Huddle Offense” segment, Cramer pondered why the tech sector is always the first to rally off the lows. Tech companies have a lot going for them, but to truly understand them, it’s easier to look at what they don’t have.
Tech companies don’t have exposure to commodity inflation or supply-chain woes. They don’t have factories or warehouses or unions. They have no exposure to semiconductor shortages, and most importantly, they’re nearly standing still.
Everyone needs technology to become more efficient, that’s why they’re always in high demand.
But not all tech companies are created equal. Those trading on promises, without real earnings, must be sold in a rising interest rate environment. Use any strength to sell this type of tech, Cramer urged. The ones with real earnings however, will remain market darlings for a long time to come.
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