We have a lot of worries in this market, Cramer said during Monday’s Mad Money. Earnings, natural-gas explosions, oil spills, nukes in Iran and North Korea and especially “bungling” governments, as he called them. This latter point has been the biggest concern of late, as the European Union struggles to stabilize itself, but there are also threats here in the States like increased taxes, new regulations or the elimination of subsidies. So investors must find the themes that transcend these problems.
Cramer thinks he’s found a few. So all week he’ll be highlighting them and offering up themes “so powerful no government on earth can stop them.”
The first? China’s growing middle class.
Sure, some people are worried about a government-mandated slowdown in the country, but Cramer said it won’t be “that severe.” He thinks the real-estate bubble will be dealt with, but other industries will be left alone. Besides, UBS is predicting that China’s gross domestic product growth will decelerate from 11.9% in the first quarter of this year to 8.5% in the fourth quarter, and that’s "still very healthy." And even if the slowdown in China is worse than expected, Cramer doubts it’ll be enough to put a damper on the huge trend that is the rise of China’s middle class.
That’s because, according to the Brookings Institute, the middle class could grow to 670 million Chinese by 2021, up from 150 million people today – or 520 million new consumers for all kinds of products and services.
"This is a force that cannot be stopped ... not even by government intervention," the Mad Money host said. "And we want to look at a number of different ways to play it."
Playing the World's Biggest Internet Population
Even though the online penetration rate is still at 29%, Cramer thinks there is a lot of room to grow. On March 23, he recommended Baidu at a split-adjusted $59.49 for a gain of more than 21%, after it's largest competitor, Google , decided to leave China. The company owns up to 80% of the Chinese search market and its online advertising is growing at a 40% compound annual rate. Baidu is up 150% in the last year and is trading at 36 times earnings, but Cramer called it a "mega-growth stock where the growth rate has become stratospheric": 50%. Money managers always are willing to pay up for stocks with that kind of potential.
Cramer also likes Yahoo!, which has several Chinese Internet assets that aren't reflected in the share price.
Tapping Into Tech Savvy Chinese Consumers
There are several semiconductor companies with Chinese exposure and they're moving "a lot of product," Cramer said. He likes NVIDIA , which got 39% of its sales from China last year. Other notable chip makers include ON Semiconductors with 32% Chinese exposure, Cypress Semiconductors with 24% and Marvell Tech at 26%.
Expecting Growth in Retail
It already has 37 stores in China but Coach plans to open more, Cramer said. The high-end retailer expects to do $250 million in sales in fiscal year 2012, reaching its revenue target one year ahead of schedule. Coach is an appealing stock, Cramer said, because it has little European exposure. Seventy percent of its sales came from the US last year, and Japan made up 20%.
Nike also plans to expand from 300 cities in China to 500 cities. Cramer called the company’s 9% future-orders growth in China "impressive." Future orders allow retailers to order merchandise five to six months in advance, and they offers a glimpse into what kind of growth the company can expect.
A WYNN-ing Play
"What else do people do when they start making enough money to become middle class?" Cramer asked. "They take vacations. They gamble the money away."
That's why the Mad Money host likes Wynn Resorts as a China play. It has two casinos in Macau, which is the only city in China where gambling is legal. Cramer recommended WYNN back on July 21, 2009, and it’s up over 90% since then.
150 Million People Need to Eat, Right?
Cramer expects growth in the restaurant business, especially in fast food. The parent company of KFC, Pizza Hut, Taco Bell and Long John Silver's, Yum! Brands , will be one to watch, he said. The company is growing at a 37% clip in China, where it opened 96 restaurants in the first quarter alone.
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