When the Fed aggressively cuts rates, Wall Street buys retail, Cramer said.
Money managers know that a big rate cut equals increased year-over-year earnings in the sector. Yes, they’re already dreaming of a bustling Christmas season 12 months away, and Homegamers should be doing the same thing.
But not just any retailer will do. There’s no guarantee the Fed has saved the day. So Cramer recommended a stock that can do well no matter which way the economy goes: TJX.
TJX, as a discount store, tends to do better in a recession than other high-end retailers. In fact, TJX takes market share specifically because shoppers are trying to save money when times are tough. As Cramer pointed out, a $39 Under Armour shirt goes for $20 at TJ Maxx.
And strong leadership has made the company a big turnaround story. The CEO, Carol Meyrowitz, was returning strong numbers even before today’s cut – TJX reported a rise in same-store sales in December, and it raised fourth-quarter guidance – “imagine how well she’ll do now,” Cramer said.
TJX has a nice buyback, too. Almost $1 billion worth of stock has been repurchased just this month. It’s nice cushion investors can depend on if the stock takes a hit.
Lastly, TJX is cheap, trading at the low end of its historical range. “The company’s going too strong for the stock to stay down here,” Cramer said. If the stock gets back to its median price, that’s a 15% gain, Cramer said. A return to the higher end of that range could return 40% to shareholders.
“Even after this cut, there aren’t many stocks that work,” Cramer said, “but TJX has proved itself worthy.”
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