Digging Deep for Deals
A sell-off is the perfect time to put one of Cramer’s key investing rules – buy broken stocks, not broken companies – to work. So he’s picking among the rubble to find the best deals for Home Gamers.
Sell-offs take the bad stocks and the good. So while some share prices deserved the hit they took Thursday and Friday, others did not. Now these otherwise robust and healthy companies have been put on sale because of yesterday’s market dip.
If there’s a bright side to recent events, it’s that the downturn took place during earnings season. That gives investors a list of companies that outperformed and should be trading higher than where they are now. These are the stocks that could jump once this ship rights itself. Cramer has several picks in mind. Of these eight picks, only those that serve to diversify a portfolio should be bought.
To reiterate an important point that Cramer made yesterday, investors shouldn’t be buying before they’ve purged their portfolios of banks, brokers and housing stocks. Be sure to take profits in the winners too.
Soft-goods stocks thrive during weakness, Cramer said, and he likes Pepsico and Kellogg in the group. Both companies are enjoying healthy growth because of, well, healthier products – Kellogg with cereals and snacks and Pepsi with Frito-Lay. Pepsi goes to $80 and K goes to $60 as long as grain prices moderate.
There’s regular M&A activity in the chemicals sector, and Nova Chemicals could be the next target. Even if it’s not, the earnings were still good. Down a dollar, Cramer said this stock is not to be missed.
Schering-Plough and Celgene get the thumbs up. The good news from trials of blood cancer drug Revlimid should bode well for Celgene’s future growth and SGP has great a cholesterol franchise and sinus business. The market volatility cut $5 off Schering, Cramer said, and that’s a discount too good to ignore. Cramer figures that projections for 2010, 2011 and 2012 mean CELG is worth $75.
Lastly, Cramer likes EMC for its strong earnings and the spin-off of VMWare. He said this IPO is looking like the sexiest IPO of the year. EMC has almost used up its billion-dollar repurchase authorization, but Cramer thinks the money from the IPO could be used toward a new buyback.
Bottom Line: Search among the rubble for a good deal. And check back for more of Cramer’s suggestions.
Jim's charitable trust owns EMC.
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