Jim Cramer makes sense of what is driving markets swings
Speakers
Jim Cramer
— Host, Mad Money
Summary
Jim Cramer examines early-year market dislocations and rotation, arguing that stocks often get out of whack in January before rationalizing. He contrasts Constellation Energy's expensive valuation with Constellation Brands' overcorrected stock, favors Costco over Walmart, and highlights Nike, homebuilders, and Home Depot as beaten-down consumer/housing names. He also cautions investors to wait on SoFi and notes NVIDIA's lack of reaction to good news as part of a rotation out of last year's tech winners.
- Cramer frames January market swings as a natural rationalization process rather than a reason to panic.
- Constellation Energy is called dangerously expensive, while Constellation Brands may have overcorrected.
- Costco is favored over Walmart after strong monthly sales and expected earnings-estimate increases.
- Nike is backed because of insider buying, North America stabilization, and a new turnaround plan.
- Homebuilders and Home Depot are cited as housing-related opportunities despite analyst downgrades.
- SoFi is not yet a buy, as Cramer says it has not fallen enough and trades heavy.
- NVIDIA's good news no longer moves the stock, and Amazon is cited as the Mag 7 rotation winner.
- Cramer warns the early-year rotation from tech winners to laggards may last only days or weeks.
Ideas
CEG dangerously expensive; no bottom yet.
Constellation Energy has been loved by hyperscalers for clean nuclear power and the stock is up over 175% in two years, but it now sells for 28 times this year's earnings, which is very pricey for a utility. The stock has already fallen from 353 to 322 and Cramer sees no signs of bottoming; he calls it dangerously expensive.
Overcorrected; valuation too low versus Modelo.
Constellation Brands has been one of the worst stocks, down over 40%, hit by higher beer prices, younger people drinking less, Mexico import and packaging taxes, an immigration crackdown hurting its Hispanic customer base, and weight-loss drugs. But at 13 times earnings it may have overcorrected, and it owns Modelo Especial, the beer with the most US revenue. Later Cramer said it reported a top- and bottom-line beat and the stars are finally aligning for a turnaround.
Walmart valuation stretched; stock has stalled.
Walmart was last year's retail winner, up over 23% as the store of choice for cash-strapped consumers and upper-middle-class trade-down, but its P/E has skyrocketed into the 40s. Since the new year, Walmart has done nothing while Costco has rallied, making Walmart less attractive after its valuation expanded.
Costco earnings estimates too low; buy.
Costco lost long-time CFO Richard Galanti and renewal-rate growth slowed, and it paid over 50 times earnings while the stock lagged, falling 6% last year. But since the new year it has rallied from 862 to 915 after better-than-expected monthly sales; comparable sales accelerated in December, digital stepped up, and it was the best beat Cramer has seen in a while. He thinks estimates are too low and expects earnings bumps and price-target increases; he likes it.
Insider buys, value; invest alongside Cook.
Nike has been a nightmare long term and China is a disaster, but there is a lot of value in the new year, North America has already turned, and new CEO Elliott Hill has a plan to return Nike to its sports roots. Three board members, including Hill and Apple CEO Tim Cook, bought a ton of stock, with Cook putting almost $3 million to work. The stock closed up more than 3% despite a Needham downgrade, which Cramer sees as immunization against negativity; he wants to invest alongside Cook and Hill and expects analysts to turn positive.
Downgrades overdone; homebuilders bounced; want to own.
Homebuilders face almost daily analyst downgrades and price-target cuts, but Cramer thinks those cuts have gone too far and the group has actually bounced. He wants to own them.
Housing turnover proxy; institutional selling could boost.
Home Depot is tied to housing turnover, which many investors have given up on, but it is a leading indicator that rallied 3% today. It would get a real boost if the president forces institutional investors that own single-family homes to dump them en masse. Cramer owns it for the Chapel Trust as his only housing exposure and is beginning to feel good about it.
Good news no longer moves NVIDIA.
NVIDIA can report good news but the stock does nothing; nobody seems to care anymore and the stock is providing a lot of cash for other stocks in the early-year rotation. Cramer does not know how long this rotation will last, but the setup suggests leadership fatigue.
SoFi not down enough; wait.
A caller asked whether to buy more SoFi after its share price was punished, citing falling-rate expectations, AI integration, and its digital model. Cramer said the stock has not come down enough, acts heavy with a lot for sale, and told the caller to wait; he would not give the go-ahead to buy it.
