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Cramer: 2 stocks to buy on the way down

Jim Cramer always tells investors to scale into new positions on a decline. If you're looking to put money to work, the current selloff may be presenting significant opportunity.

"There are two stocks that I think you can buy on the way down if we get more weakness, in part, because the underlying companies will be in there buying back their own shares right along with you," Cramer said. "I'm talking about Flextronics and Monsanto."

First introduced by billionaire investor Larry Robbins at the CNBC Delivering Alpha conference, Cramer circled back to these ideas because Robbins is famed for seeking out good businesses, with low valuations and excess capital. These are exactly the kinds of stocks that Jim Cramer often says can help individual investors beat the market, if you're willing to do the homework.

Here's what Cramer and Robbins like about each stock.

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Flextronics

"Flextronics is the second largest electronics manufacturing services company on earth," Cramer explained. And with so many companies outsourcing their manufacturing activity, both pros think Flextronics is in the sweet spot. "They have a diverse customer base, their contracts are consistent and predictable, and their balance sheet is relatively clean," Cramer said.

Although fundamentals are bullish, another catalyst could drive an advance too.

Flextronics generates a lot of cash. In fact, it generates so much cash it's using the money to repurchase shares. "Recently, Flextronics was able to increase their repurchase authorization to about 20 percent of the market cap; before last October, the buyback limit was 10 percent."

And while the buyback was still at 10 percent, Flextronics retired roughly a third of its float. "That's a massive buyback and now it's poised to get even more gigantic. In fact, Robbins made it clear that this buyback is more important to him than the actual orders the company's getting," Cramer said.

Finally, the stock is cheap. "Flextronics trades at just 9 times next year's earnings estimates despite having a 13 percent long-term growth rate. If FLEX can trade up to merely 11 times next year's earnings estimates, then this would be a $12.50 stock," said Cramer.

Monsanto

"Monsanto is both a genetically modified seed firm and a chemical company," Cramer said, with several long-term tailwinds.

"As developing countries become wealthier, the fastest way for farmers to boost their crop yields is to use genetically engineered super-seeds. Monsanto is the leading player in the space."

Also Cramer thinks sales could increase dramatically as, "Monsanto invests heavily to expand their seed capacity in South America and Eastern Europe, where corn acreage should rise dramatically over the next few years."

Meanwhile Robbins thinks estimates may be to be too low, while Cramer sees the company as a potential break-up story. "I have to believe that if you split these into two independent companies, then the genetically modified seed business would get a much higher price to earnings multiple. So, on a sum of the parts basis, if you valued these two divisions like other, similar companies, then Monsanto could be worth $135 per share on a breakup."

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Finally the company announced a $10 billion buyback that they're financing with new debt. "Ordinarily I'm skeptical of debt-fueled buybacks, but Monsanto's planning to repurchase the equivalent of 17 percent of its market cap over the next two years, which I find very comforting in an environment where the whole market keeps getting slammed," Cramer said.




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