Cramer would steer clear of financials like Merrill Lynch and housing stocks like Pulte. The strength of these companies is just too subjective. Is Merrill hiding its subprime woes? Can Pulte be trusted? How much exposure to these struggling sectors do JPMorgan Chase, Lehman and Bear Stearns have? With the truth so potentially easy to bend, there’s too much room for the rumor mill to go to work, Cramer said. Some “bad news” could easily hurt a stock, good or bad, in this environment.
It’s better to deal with companies that are measured by hard metrics. Think of the bull markets in full swing right now: aerospace, minerals and mining, agriculture, infrastructure, machinery, oil and oil service. There’s also Cramer’s four horsemen of tech: Google, Apple, Amazon and Research in Motion.
These companies are easier to value, Cramer said. They deal in real numbers: 400 planes orders, 50% increase in backlog, rising price of copper, oil at $75. It probably doesn’t matter what people are saying about the stocks, especially management, because the performance can be measured.
So if you’re going to buy anything, Cramer recommends the six bull markets and the four horseman. There’s plenty there to pull together a diversified portfolio, he said. Maybe a financial like Goldman Sachs is a great long-term play, but it’s not something that’s worth buying now.
Bottom Line: If it can’t be rumored, that’s probably a good stock to buy. If it can be rumored, why punish yourself?
Jim's charitable trust owns Goldman Sachs.
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