Sell Block: ConAgra's Conundrum

The impending recession means investors should start buying so-called safety stocks, Cramer said Thursday. But not just any will do.

You heard right: recession. Cramer said he’s worried that’s where we are headed because perpetual Pollyannas Ben Bernanke and Henry Paulson, the heads of the Federal Reserve and the Treasury, respectively, keep saying the worst of the U.S. economy’s troubles are over. It was that lack of realism that allowed more damage than necessary in the credit and housing markets last year, and it could get us into trouble again. So Cramer wants you prepared.

The typical strategy during a downturn is to by supermarket stocks, the companies that sell food and beverages and personal-goods items. But with inflation so high – in both food and energy – investors need to be more careful about whom they pick. In this environment, not all stocks are performing equally.

Coca-Cola , Pepsico, General Mills and Altria look like they’ll withstand a setback in the markets. Cramer said he’s confident they will meet their earnings estimates at the next quarter. ConAgra, though, could be in trouble.

ConAgra’s estimates don’t take into account the massive commodity inflation that’s central to the company’s business. Corn is up 76%, wheat 39%, oil 64%, and natural gas has risen a whopping 113%. Put simply, Cramer said, “ConAgra is being eaten alive by raw costs.” The chance that these price increases will result in an earnings miss leave shareholders with only one option.

“When you own a stock and you know the numbers are too high,” Cramer said, “that’s like being on the train tracks and hearing the toot toot of an oncoming train – you need to get off the darn tracks. And that’s why I am saying sell, sell, sell ConAgra.”

Jim's charitable trust owns Altria.

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