Jim Cramer’s favorite investment themes in this rough market and 3 stocks he likes now
During the April Monthly Meeting on Wednesday, we took questions directly from Investing Club members. Here are the responses from Jim Cramer and Director of Portfolio Analysis Jeff Marks. Their answers have been adapted for length and clarity. 1. Given that Wells Fargo is at a recent high, and is up over 90% since first recommended, is it wise to take a little off? Is it still in a sweet spot if relying more on fee-based income during a higher for long rate environment? (Jim, North Carolina) Jeff Marks: We’ve right-sized it a couple months ago when the stock went into the $50-per-share range, and I think another trim is due. It’s well above a 5% weighting. It’s had a great run. It had, by the way, a massive move last week in a horrible market. I think a lot of that has to do with the buyback. They’re stepping up their buyback this year versus last year. I think it’s no coincidence as they’re making so much progress on the asset cap. Maybe they’re looking forward to that. We’re restricted now so we’ll have to wait and see. It is the largest position in the portfolio because it has been such a great performer — better than JPMorgan this year. … It has been one of the best banks to own. 2. Lately there has been a lot of news about gold appreciation. What is the best way to invest in gold and is it a good time to do so? (Gary, Philadelphia) Jim Cramer: Go to Club holding Costco’s website and buy gold. … Game, set, match. The miners are not working because their costs are too high. Gold bullion bought at Costco is the best way. 3. How do you determine the level of cash to keep for the Investing Club? Do you plus-up in cash prior to paying out the gains and dividends to charity every year? (Ed, Texas) Jeff Marks: We do. You typically see us do that towards the beginning of the year into early spring. We get the distribution out sometime around March. In terms of cash, it ebbs and flows. When we do see a lot of parabolic moves happening in the market that’s usually a sign for us to start raising cash. And when we do get a pullback, and [the market] becomes oversold, that’s when we start deploying. 4. With the presidential election a few months away and summer coming, what are some sectors we should be focusing on? (Sonny) Jim Cramer: Former President Donald Trump wants more defense. President Trump wants mergers. President Trump wants the stock market higher. … He doesn’t believe in climate change and that’s very positive for oil and gas. Jeff Marks: There’s a difference in tax-rate policy. On corporate taxes, maybe Trump looks to cut again whereas President Joe Biden maybe an increase in taxes. It’s still many months away. I don’t think we’re necessarily looking ahead to it just yet. Let’s just focus on earnings this week. 5. What is the outlook for Abbott Labs now that we know earnings are good but premature baby formula trial is in July? (James) Jim Cramer: It’s not a class action suit. It’s not what afflicted Johnson & Johnson . But people are acting as if its exactly the same. And it’s just not. … We’re looking to buy again, but we have to take a little discount. We don’t want to buy at the same price over and over again. That’s just not what you do. You scale. Jeff Marks: The outlook is strong. We saw that last quarter. It was a beat. They raised their earnings outlook. They raised their organic sales outlook. They haven’t raised after a first quarter since 2016. I think that’s just a tremendous indication — growing 9% organic growth. It’s also a dividend aristocrat. They do have a great balance sheet. But I think that trial in July is keeping people on the sidelines. We still think that weakness is an opportunity. They may lose in July but once they get a couple wins under their belt, it will be very different. 6. At a previous Monthly Meeting you offered up a trade for those interested – Alibaba , Baidu , PDD Holdings , and JD.com . What are your current thoughts on this trade, for those of us that decided to get into it? (Bob, Minnesota) Jim Cramer: I want to say that you should continue it because I think the Chinese want their market to move up. I know that sounds a little ridiculous, but it’s a rigged market and right now it’s rigged in favor of the people who own. There’s times when the government wants to punish you and times when they want to take it up. That’s the way it works over there. 7. Eaton has run so much since the initial buy it is way above the cost basis. Will we ever buy more and if so what price? Since the position is so small, should we sell it and move on to something else? (Michael) Jeff Marks: I don’t want you to sell it. It’s had a nice pullback from around $330 [per share] to around $300. Mid-$300 might be interesting if it does pull back there again. The stock is about 10% off the high. I thought Vertiv’s quarter gave strong indication around the data center trend, which, of course, was the main reason why we started buying Eaton last fall. Eaton has had a very strong outlook. It’s this electrical theme centered around so many different megatrends like reshoring, reindustrialization, the energy transition, data center. These AI data centers have more electrical components to them versus traditional data centers so that’s another tailwind for Eaton. 8. Can you review the general secular trends that are currently the basis for your investments. For instance, in the past, you’ve discussed themes such as the humanization of pets and cybersecurity. Would love to hear what your current thoughts. (Anthony) Jim Cramer: We love the data center. We love the hyperscalers because they can do well in an environment where the economy might be slowing down. Remember we think that March is very slow. We like ancillaries to home, which do matter a lot whether it be Dupont or Stanley Black & Decker . But I think overall what we’re looking for is the highest growth we can get – Eli Lilly – and also the most consistent growth, like a Constellation . We’re not necessarily levered to humanization of pets [like in years past]. It’s just not working right now. What we’re doing is looking at a stock and deciding whether that stock has great growth or not. Jeff Marks: Since the passing of the Inflation Reduction Act and, of course, AI, you’ve seen a lot more of the industrial trends being the secular. Fixing the grid, data center growth, electric vehicles. Electrical demand grew at a 0.4% compound annual growth rate from 2013 to 2023. Bank of America thinks that’s going to grow 2.8% CAGR from 2023 to 2030, so just a massive step function. I think cybersecurity still holds, the artificial intelligence boom, reindustrialization, reshoring of the supply chain since the pandemic — all good trends. 9. Currently Foot Locker is below the level the Club last sold it. Is it time to start incrementally buying for the turnaround, or is the turnaround too far away yet? (Nancy) Jeff Marks: I think we’re just going to wait for now to buy back, even though it is lower from where we sold it. We did buy Estee Lauder just last week around $140, but still a very volatile situation there. With Foot Locker, they’re doing a good job on the inventory side, but they had to reinvest a little bit too much than the market expected this year, so that caused the delay in their timing. I was encouraged at what Nike had to say in terms of re-embracing their wholesale channel. … I think just waiting for a little more progress on the turnaround before buying. 10. What is the best way to ride out a volatile market that we are experiencing currently? (Gordon) Jim Cramer: It’s cash. It’s not puts. It’s not selling calls. Cash is king on these declines. It lets you make decisions, and it gives you a clear head. I think you should monitor our cash position – 8.3%. That’s actually up for the Trust. … When we went over all the stocks, I said I like Best Buy and Abbott Labs. I think Wynn is good, but we have a big portfolio and I’m not interested in buying a lot of the stocks. One, because I’m not willing to violate our basis, but two, because it’s not a great market. And to own that is really, really important. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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