The great pivot on Wall Street continues, and it's being funded by money managers selling all of your favorite tech stocks. Those were Jim Cramer's cautionary words to his Mad Money viewers Monday. The tech stocks still have growth, but this is a market that only wants value.
It's time to retire FAANG, Cramer's acronym for Meta (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL). Put simply, FAANG doesn't thrive in the works with high inflation and rising interest rates, and that's what we're likely to have for the foreseeable future.
While it's true that some commodities are already peaking, the fact is that Russia's invasion of Ukraine is likely to keep food and energy prices elevated. China's lockdowns against Covid are adding to supply chain issues, and there's no relief in sight for labor or freight prices anytime soon.
Cramer told viewers they need to use any market bounce to cut back their exposure to tech and focus instead on money center banks, oils, retailers with scale, health insurers and big pharma. It's time to forget FAANG, forget tech and forget biotech until these sectors become cheaper than the rest of the market.
"I hate this pivot," Cramer concluded, but with money managers repositioning, we have no choice but to pivot along with them.
Growth at a Reasonable Price
The tech stocks may be out of favor on Wall Street, but that doesn't mean all growth should be avoided. Cramer reintroduced viewers to GARP, or Growth At A Reasonable Price, an old and all-but-forgotten investing style that's coming back into vogue in a big way.
GARP simply means looking for companies that are not only growing, but are growing with a stock price that makes sense for market conditions. Cramer kicked off a week-long series looking for stocks that fit the GARP model, starting first with the travel and leisure sector.
After applying several screens to the travel stocks, Cramer identified six that fit the GARP model. Both Expedia (EXPE) and Booking Holdings (BKNG) are reopening stocks that have great growth. Expedia trades for 24 times earnings, while Booking is 20% off its former highs. Marriott (MAR) also fits the bill, trading at 30 times earnings, but with a high growth rate as travel resumes.
Investors can also look at Walt Disney (DIS) as a GARP stock, as it trades at 22 times earnings with a great growth outlook. Closer to home, investors might want to consider Darden Restaurants (DRI), which trades at 17 times earnings with a 3.5% dividend, or food distributor Sysco (SYY), which trades at 28 times earnings.
All of these stocks give you the growth of a tech stock, but at a much more reasonable valuation.
Playing Interest Rates and Inflation
Looking for yet another way to play rising interest rates and inflation? One of the best kept secrets in this market isn’t a tech stock or an oil play, it’s Hershey Foods (HSY), the best performing packaged foods stock.
For many years, Hershey was an underperformer, but that all changed in 2017, when Hershey’s new CEO focused on growth, acquisitions and returning cash to shareholders. Hershey has since returned 105% over the past three years thanks to smart acquisitions like Skinny Pop and Pirate’s Booty.
Unlike most packaged foods companies, Hershey enjoys 45% gross margins, and with Easter right around the corner, Cramer said he’d be a buyer right here and would buy more into any market weakness.
Retail Sector Update
For the latest read on the retail sector, Cramer spoke with Matthew Boss, JPMorgan Chase & Co.'s Retailing Head of Dept. Stores & Specialty Softlines, on the heels of its annual Retail Roundup event.
Boss said the key takeaway from this year's roundup is the resilience of the consumer. Some segments, like homes and furniture, are coming under pressure, but largely, the macro environment is strong and wages are higher.
Boss said companies like Dollar General (DG) and Five Below (FIVE) are thriving at the low end, while brands with pricing power, like Nike (NKE), Lululemon Athletica (LULU) and Levi Strauss (LEVI) are also thriving.
Retailers are still working hard to achieve pre-pandemic revenue levels, Boss added, but they do so with stronger balance sheets that include less debt, higher gross margins and ultimately, bigger profits.
Lightning Round
In the Lightning Round, Cramer was bullish on DraftKings (DKNG) and Altria (MO).
Cramer was bearish on SoFi Technologies (SOFI) and Editas Medicine (EDIT).
Great Liberation
In his "No Huddle Offense" segment, Cramer said to forget about the "great resignation," and instead think about it as the "great liberation."
Most people didn't leave their jobs and vanish into thin air, they re-evaluated their lives and many started their own businesses. That's why services like Shopify (SHOP) and Etsy (ETSY) are in high demand, even if their stock prices don't reflect it.
The pandemic also changed where people choose to live, how they choose to get their goods and services, think DoorDash (DASH), and for those who chose to stay at their jobs, it's given them more bargaining power.
There's a reason why employees at Starbucks (SBUX) and Amazon are starting to unionize, Cramer concluded, the great liberation is upon us and it's a good thing.
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