Cramer knows he got a bit cocky with last week’s Game Plan, so this week he’s staying humble. Even though there are a number of good-looking tech stocks reporting next week, he refuses to make the same mistake twice. Remember the rule: No tech ‘til August.
So instead he’s focusing on retail and related plays that he believes offer good entry points if Thursday’s pullback returns in full force next week. It’s still important to be careful, though. Cramer recommends buying half a position before the quarter and half after, especially because the companies he wants to highlight are subject to misinterpretation, which is what he’s banking on.
Take Ralph Lauren, for instance, one of Cramer’s favorite stocks. It reported great numbers last quarter, but the Street sold off hard after misreading RL’s lowered earnings estimates for the future. What RL was doing was spending to grow the business, and the sell-off gave investors a chance to buy in at a discount. The stock shot up to the high $90s after that and recently pulled back to about $92. Cramer bets the Street will misjudge RL again, which is why he thinks saving half a position until after the report is a good idea. If it gets crushed again, there’s your discount.
Costco has almost the same story when it comes to being misunderstood by the Street, and that’s despite being a consistent company among other shaky retailers, Cramer says. He calls it a “delivery machine.” For this play, he’d hold out until after the report because he’s confident the traders will misjudge the stock again. If they do, investors have an entry point. If not, Cramer says forget it. “We’ll get something else.”
The last stock on the list is Sears Holdings. SHLD has fallen behind the market averages because of the housing lag, but Cramer thinks this is a longer-term buy. He’s got faith in Chairman Eddie Lampert. If the stock takes a hit after reporting its quarter, that could be a chance to buy in. If it doesn’t, Cramer recommends waiting. He says that someone is always trying to keep this stock down, so more opportunities to buy SHLD should come.
Bottom Line: Next week be on the lookout for the market to misunderstand Ralph Lauren, Costco and Sears, Cramer says. If nobody starts a sell-off in these names, good, you’ve bought some before the quarter. If a sell-off happens, even better because you’ve got a great entry point.
Jim’s charitable trust owns Sears Holdings.
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