Buy soft-goods companies and “secular growers,” Cramer said Friday, to protect against another week of disappointing jobs numbers. At this point in the cycle, these might be the only stocks that work.
The market’s decline, driven by lagging employment, will come in three phases, the Mad Money host said, and we’re just about done the first. That’s when everything goes down. As a result, investors play defense by switching into soft goods – companies that make food, drink, cigarettes and medicine. This was apparent today, as these are the very stocks that buoyed the Dow’s losses.
Meanwhile, the companies that Cramer calls secular growers – because they don’t need a strong economy to perform well – will rally. Take Apple’s $4 jump on Friday, for instance, which came as a result the wireless Internet’s continued growth.
At the same time, the companies that rely on the economy head lower. But these “accidental high yielders,” as Cramer calls them, should bottom next week, he said. These are the cyclical plays whose dividend yields increase as a result of their reduced share prices. He said he also expects the highest-quality banks, insurers and retailers to bottom then as well.
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Unfortunately, though, the companies that make more expensive products – autos and homes – will most likely continue to take a hit. These stocks won’t bottom “until they go a lot lower,” Cramer said, “and that could take a little while.” So investors are better off sticking with soft goods and secular growers until these other companies are much cheaper.
But that was only half of Cramer’s game plan on Friday. He wanted viewers to play earnings season as well. Specifically, he recommended they buy companies in the safest sectors who had already pre-announced strong quarterly results.
Management rarely steps out in front of a quarter unless the future “looks even better,” Cramer said. “So those stocks are as close to certain as you can get.” Also, all of them are down because of the sell-off, giving investors a great entry point.
First, General Mills pre-announced better-than-expected earnings on Sept. 10, when it traded at $60.54, and then blew away the numbers on Sept. 23 and raised fiscal 2010 guidance. The stock now is up to only $63.89 because of the market’s overall poor performance. But with its growing market share and good cost controls, General Mills should withstand any further declines, Cramer said.
Procter & Gamble also pre-announced on Sept. 10, reaffirming its guidance, and that pushed the stock up 4%. Wall Street welcomed the good news after a string of disappointing results from the company, and Cramer said he expects still more positivity when P&G reports on Oct. 29. The stock, at $56.75, is only slightly higher than its closing price after the pre-announcement, so the share price could see a bump if the company comes through at month’s end.
Two tech stocks made the cut: Xilinx and Teradyne . Both are trading lower than they were at their pre-announcements, but Cramer said he likes both of them as we head into earnings season.
Cramer also offered up another haven for investors: Boeing , an investment in what he sees as a renewed cycle in aerospace. There’s been a lot of good news out of this industry lately, he said, and the company’s long-awaited 787 Dreamliner should kick things off when it takes flight in the fourth quarter. He called it a “multiyear story,” with BA and its 3% dividend as the way to play it.
Beyond simply buying stocks, though, Cramer urged viewers to use a few company reports and data releases next week to gauge the markets and economy. Both could rise or fall depending on the numbers we see in restaurants, retail, agriculture and jobs, he said. Watch the video for the full report.
Cramer's charitable trust owns Procter & Gamble.
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