Cramer says avoid ‘clown companies’ with no revenue, look for dwindling tech buys
CNBC’s Jim Cramer said Wednesday that investors should look to profitable companies for potential buying opportunities after another tech-focused selloff.
“A lot of the companies that went down yesterday…were really really good companies, and I think you need to start buying them,” Cramer said on “Squawk Box” ahead of the market open. He cited Airbnb as an example of a recently weaker but profitable company that stands out.
Cramer added that buyers should avoid what he calls “clown companies” and invest their money elsewhere.
“Look at any company that’s gone public since 2018, almost all of us want to sell, it’s the pre-revenue ones, which is a hilarious term I haven’t heard since 2000,” said Cramer, referring to 2000 – when the late 1990s dot-com bubble burst. The Nasdaq lost about 80% of its value in the two years after the bubble burst. Many companies with dubious financial prospects went public during this period and then went bankrupt.
The “Mad Money” host drew parallels to the current SPAC craze, which makes it easier for companies to become publicly traded stocks through mergers with special purpose acquisition companies.
Cramer also said he rebels against many of the narratives given as reasons for recent stock market slides. Growth stocks, many of which are tech names, have been hit hard by rising bond yields, making it more expensive to borrow to grow.
Major averages rose in volatile trading on Wednesday, a day after the Nasdaq posted its lowest close in three months. On Tuesday, the Nasdaq fell more than 2%, while the Dow Jones and S&P 500 each fell more than 1%.
Cramer called out market naysayers for trying to have it both ways over expectations that the Federal Reserve will raise interest rates four times this year among other monetary policy tightening measures. “The bears say if they go up four times it’s bad for Bank of America, but if they don’t go up it’s bad for Bank of America – forget it,” he said .
Bank earnings tend to improve when rates rise. Shares of Bank of America, which have gained nearly 45% in the past 12 months, rose about 2% on Wednesday on better-than-expected quarterly results.
Buyers should cut through the chatter and spot companies that are doing well, Cramer said.
“We have to start thinking about individual companies…like Warren Buffett, man, he’s probably sitting there laughing at us,” Cramer said, referring to Berkshire billionaire Hathaway as the standard-bearer for picking winning stocks from first order.
“I want to be in companies that make things, do things, and get paid for them, and are profitable. That’s a pretty simple message,” Cramer said later on “Squawk on the Street,” echoing to its 2022 playbook for investing in businesses. with tangible products and results.
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