The Dow shot up 133 points intraday only to plummet back down, closing 69 points in the red. Why?
Europe, of course.
As soon as the euro dropped, so did the American markets. The Chinese reportedly are debating whether or not to sell their European bonds, and that’s what killed our upward momentum.
As Cramer has said before, until the European Central Bank cuts its interest rates to zero percent as the US did, and until the entire Continent comes together and works in a coordinated effort to end its debt crisis, our stocks will be hostage to their troubles.
Should that happen, Cramer finally will recommend investments other than the accidental high-yielders he has so often talked about. Remember, these are the companies that don’t pay big dividends but whose dividend yields have jumped because their share prices have fallen. He likes them because investors can collect that payout as they wait for a recovery, and the yield attracts other buyers who put a floor in the stocks.
But one day the pressure from Europe will subside and American companies will rebound. When that happens, there are a number of stocks that investors should consider, and they are all sitting on today’s 52-week high list. Any stock that made this list on a day like today – despite euro weakness, banking worries, sovereign risk or a collapse in commodities – have proved themselves both “trusted” and “verified” by the market, Cramer said.
Remove the stocks with market caps under $250 million or those that are about to be taken over and you’re left with only 12 that made the cut:
- Alaska Air
- Dollar General
- Dollar Tree
- Family Dollar
- O’Reilly Automotive
- Advance Auto Parts
- American Medical System Holdings
- Acme Packet
Investors could further eliminate Alaska Air, American Medical and Chemed, Cramer said. As a general rule, he doesn’t like the airlines, and he doubts their share prices will stay up this high once energy prices start climbing again. And the other two operate in health care, an industry he said was “filled with landmines” right now.
But that leaves three other sectors – auto parts, dollar stores and tech – that offer an important look at what’s working right now.
In a tough economy, strength in both auto parts and dollar stores represent cost-conscious consumers. They keep their cars longer, fixing when necessary, and shop at trade-down stores to save cash. So with Dollar General, Dollar Tree, Advance Auto Parts, Autozone and O’Reilly Automotive doing well, then investors must assume the consumer is under pressure right now. That means these stocks could work even in this market.
But don’t buy them right away, Cramer said. He recommends waiting for any new-high list to come down 5% before starting a position in them. For those who don’t want to wait, he said they might buy similar trade-down plays like Treehouse Foods, Ralcorp and Perrigo.
On the tech side with VMware, Acme Packet and SanDisk, Cramer sees more proof that the Internet tsunami is alive and well. All of them are related to the growth in on-the-go Web in some way: VMW in cloud computing, which involves using and storing mobile data; SNDK in flash storage for smartphones; and APKT for data transport.
Rather than buy VMware and SanDisk, though, Cramer thinks EMC or Salesforce.com and Skyworks Solutions , respectively, might work better instead. EMC owns 80% of VMW, and the stake is hardly reflected in the stock. Plus, EMC is down 10% from its high. Salesforce is a cloud-computing leader and its shares are down 7%. And Skyworks, which makes key smartphone components, is on sale for 17% less than its recent high.
What about Acme Packet? Cramer’s still bullish on this one, he said, citing its high growth and absolutely necessary technologies now that data transfer is overtaking voice on our telco networks.
“The next time you’re looking for stocks to buy after we get hammered off the euro, after the banking crisis in Spain or potential country defaults,” Cramer said, “take a look” at these stocks.
Cramer's charitable trust owns EMC.
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