Cramer: Defending Against the Dreaded Double Dip
After a week filled mostly with losses, the Dow finished today with triple-digit gains, thanks to a better-than-expected jump in the US economy. As good as that may be, Cramer couldn’t ignore the breakdown in leadership – from tech, the banks and oil – that drove the index to 10,000 from 6,500 in early March.
Exxon Mobil’s disappointing quarter now makes it hard to own the oils. Unemployment in this country threatens the banks’ already-tenuous credit business. And bad news from computer maker Acer put pressure on tech stocks. Cramer stuck by his favorite companies in these sectors, namely BP , Apple , JPMorgan Chase and Goldman Sachs , but investors will need a better defense than these largely economically sensitive leaders if we double dip back into the recession.
That’s why the Mad Money host dug through the season’s earnings reports to find the best so-called safety stocks in the market. Read on for his top picks:
Procter & Gamble : P&G delivered a strong quarter Thursday morning, beating the Street’s earnings estimates by 7 cents a share. Cramer likes the stock right now for two reasons: The company has done a great job of turning itself around, becoming a serial outperformer after a run of underperformance. And the 3% dividend yield, which offers investors a nice cushion should other names in their portfolio take a hit.
General Mills : GIS bested the analysts’ estimates by 25 cents a share when it reported earnings in late September, and the company upped its 2010 guidance. Demand for General Mills’ products remains strong, as do cost savings, thanks to lower commodity prices lower and highly efficient manufacturing facilities. Remember, too, that people don’t stop eating no matter how bad the economy gets, and that will help to carry this stock through the market’s fluctuations. How about a second reco in this space? Cramer said Kellogg was just as good.
WellPoint : Talk about a monster quarter – WLP earned $1.53 a share, or $1.78 excluding one-time items, which is either a 16-cent or a 41-cent beat, respectively. While most of Wall Street fears health-care reform, Cramer doubts a new bill will hurt WellPoint all that much. At most, he predicted the company’s earnings per share would lose 10 cents, and that’s if there’s a loss at all. Regardless, WLP goes to $53 once the health-care debate is over, he said, no matter how it’s resolved.
McDonald’s : A 3.8% increase in same-store sales played a part in MCD’s better-than-expected quarter on Oct. 22. So, too, did the weak dollar, which helps to drive McDonald’s business overseas. Plus, the company just raised its dividend, giving shareholders a 4% payout.
None of these four stocks took off after the surprise GDP report, but that’s OK. Cramer recommended them because they don’t need the economy to do well. More to the point, “They’re going to hold up even if the economy sags,” he said. And investors might need that more right now.
Cramer's charitable trust owns BP, Goldman Sachs, JPMorgan Chase and Procter & Gamble.
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