It was another week when it paid to get out of anything in tech that used to be good: Jim Cramer
Speakers
Jim Cramer -- Host of 'Mad Money'
— CNBC host, Mad Money
Summary
- Market indices plunged: Dow down 793 points, S&P down 1.67%, Nasdaq down 2.15%, driven by oil shocks and geopolitical tensions.
- Oil stocks are consistently recommended for buying as crude prices rise, with higher oil leading to lower overall stock markets.
- Tech stocks, including former favorites like NVIDIA and Microsoft, are underperforming and should be avoided due to investor flight to oil and other sectors.
- McCormick is in merger talks with Unilever's food business; a deal could enable cost savings and improve competitiveness in tough market conditions.
- Nike faces significant challenges: intractable China market, fevered competition, and lingering inventory issues, with no line of sight to recovery.
- Cash positions are at record highs as a defensive measure against market volatility and uncertainty.
- Geopolitical events, especially the war with Iran and closure of the Strait of Hormuz, are pushing oil prices higher, which historically destroys equity valuations.
- Food stocks have been awful, with McCormick down 22% year-to-date, but mergers offer a potential way out.
- Investor sentiment has shifted away from tech towards oil drillers, soda stocks, and pharma stocks.
- The relationship between oil prices and stock market declines is described as axiomatic and likely to persist until geopolitical tensions ease.
Trade Ideas
Cramer explicitly states that "the one thing that's been consistently right is to buy oil stocks every time" because "crude is headed higher." Higher oil prices directly benefit oil companies' profits, making their stocks attractive, while overall equity markets suffer from oil-driven inflationary pressures. LONG on energy minerals (oil stocks) as they are expected to outperform in a rising oil price environment driven by geopolitical tensions. Easing of geopolitical tensions or a drop in oil prices would break the thesis.
Cramer says "it paid to get out of anything in tech that used to be good," specifically naming NVIDIA and Microsoft as stocks that are "bad now" despite being good companies. Higher oil and interest rates are causing institutions and individuals to avoid tech stocks, leading to lack of buying interest and downward pressure on prices. AVOID NVIDIA and Microsoft as they are expected to decline further in the current market environment where oil is the dominant driver. A reversal in oil price trends or interest rates could revive investor interest in tech.
Cramer owns Nike but is "nervous," citing "no line of sight for Nike to return to greatness" due to challenges in China, competition, and inventory issues. These fundamental headwinds hinder financial performance and stock price appreciation, with no immediate catalysts for improvement. AVOID Nike due to unattractive near-term prospects and lack of clear turnaround signals. Successful innovation or a sudden recovery in the US market could reverse the negative outlook.
