On Friday's Stop Trading! segment, Cramer discussed the downturn in the tech sector and how you can position your portfolio to protect against unwarranted selling.
With a lot of concern about technology in the market, Cramer gave his take on the weakness in the sector. He reminds viewers that when you see a complete exit in a sector, similar to this week's move in tech, it suggests that a big mutual fund, or several big mutual funds that have decided to sell. "They're throwing out the good with the bad," says Cramer, who doesn't see the rationale for these stocks to fall across the board.
Take, for instance, Sandisk. Cramer says there could potentially be price wars in the future of this company, and it's uncertain whether it will be providing components for Apple's products. For these reasons, he'd be hesitant to buy this company. Qualcomm had a good quarter, but offered weak guidance shortly after telling investors that things were fine, which sent investors into a panic. "Qualcomm has no credibility," says Cramer.
Microsoft , on the other hand, Cramer thinks has been dragged down by unwarranted selling occurring across the sector, a move that suggests an exodus by a large mutual fund.
So how should you invest?
Cramer doesn't think individual investors should get in front of the "mutual fund freight train," but instead watch for when the stocks drop to valuations of 12-14 times earnings that are growing in the 15% range. With fundamentals like that, Cramer would be willing to lose a few points on the stock price if unwarranted mutual fund selling continues to occur. "A lot of people are taking profits here," Cramer reminds, urging caution in commodity plays such as SanDisk.
For Cramer's full analysis and opinion on stocks like Citigroup, watch the video!
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Cramer's Charitable Trust owns Apple and Qualcomm.
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