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Cramer: Why Apple is not for the squeamish

Cramer: Investors flee winners because of China
VIDEO13:0313:03
Cramer: Investors flee winners because of China

Jim Cramer saw investors try to hide from China on Tuesday. They certainly tried their best and then cringed with pain when they were whacked upside the head by the plunging averages, yet again.

Unfortunately, for some stocks, there is no escaping China.

Even though the Chinese market rallied on Monday night, the news from companies like BMW reminded the market that it still will cause pain. BMW, the world's largest luxury car maker, warned on Tuesday that its financial forecasts for the year could be at risk if the Chinese market deteriorated any further.

And it's not just BMW, as Audi, Ford and General Motors all are struggling, too. Cramer thinks they clearly made big bets on China and have been rewarded, right up until the Chinese market hit a wall in June and prompted a vicious downward spiral.

Even Apple couldn't hide from China when it dropped more than 3 percent on Tuesday. It recently reported a quarter where it sold 3 million fewer phones than analysts expected. Cramer saw that almost immediately following earnings, a broad consensus developed that assumed the iPhone miss was almost entirely due to the Chinese market.

"So every time we get bad news out of China, like the doom and gloom from BMW last night, it reminds us that if Apple's most recent quarter had included July in the numbers, it would have been far worse," Cramer said.





It's a fact of life. The stock is not for the squeamish and it's both over-owned and over-loved
Jim Cramer
Customers pose for a photograph inside Apple Inc.'s new Canton Road store in the Tsim Sha Tsui district of Hong Kong, China, on Thursday, July 30, 2015.
Xaume Olleros | Bloomberg | Getty Images

And Cramer totally understands this logic as Apple's Chinese business now represents 26.7 percent of its sales, up about 15 percent from one year ago. And even though CEO Tim Cook assured investors that sales were strong in China this quarter, Cramer wonders if that is short-lived, based on how much the Chinese government is propping up its market.

So, while Cramer doesn't know how weak or strong Chinese sales really are, he does know one thing—Apple's stock has a really ugly chart.

"It's a fact of life. The stock is not for the squeamish, and it's both over-owned and over-loved," Cramer said. (Tweet This)

Meaning, Cramer thinks that too many analysts are recommending it and too many institutions are over-weighted in it and feel trapped.

However, he continues his long-term view with Apple, and accepts that there might be some Chinese weakness reflected in the share price. Thus, he continues to hold Apple in his charitable trust and is looking to buy more, not sell.

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What Tuesday's market really came down to, though, is that there is clearly a scarcity of places to hide from China. That overall fear was spread when Atlanta Federal Reserve President Dennis Lockhart said that he thinks the Fed should tighten in September. Cramer has multiple problems with this kind of thinking and completely disagreed.

Additionally, Cramer saw that the exact stocks that investors have been hiding in could turn out to be the highest risk. Such as Allstate, which reported very rocky results on Monday night, the biotechs like Regeneron and Biogen, and special situations like Tesla.

At the end of the day, Tuesday made Cramer feel like investors could run but couldn't hide from China.

"Unless you want to hide in stocks that aren't particularly free of risk, given how far they've run and how little safety they offer," he said.

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