Cramer: Don't Fear Inflation, Profit From It
Stocks closed lower on Tuesday, giving the Dow its second-straight day of losses, but Cramer isn't concerned. He said the sell-off was, in part, about rising commodity prices and that shouldn't be a worry either.
"When economies do better, we use more commodities to make things ... The kind of commodity inflation we are experiencing is self-correcting," he explained. "Things had gotten so bad around the world that we virtually stopped mining and stopped manufacturing things. The companies that needed these commodities to make stuff burned through all the inventories of materials and the companies that extract them got hammered."
Materials companies like Freeport-McMoRan and Vale are now working to meet a sudden resurgence of demand. These companies are opening new mines, ordering mining equipment and hiring employees.
The agriculture space is faced with grain commodity pressure thanks to global weather events, like the severe flooding in Australia. Next year, farmers will plant more crops, buy farming equipment and grow their staff.
Apart from higher prices at the grocery store, Cramer said commodity inflation seems like a good thing. After all, it's generating demand and putting people back to work.
How can you trade inflation? Companies like Freeport-McMoRan, Nucor , Union Pacific and CSX are some of the biggest beneficiaries, Cramer said.
Other companies are merging to save costs, Cramer noted. He likes Stanley Works, which purchased Black & Decker. Eaton and Honeywell are also good plays, Cramer said. Both companies bought businesses that meet the higher cost of energy.
Some companies are so strong, they can raise prices to meet increase commodity costs. Cramer likes Polo Ralph Lauren , Whole Foods and Chipotle Mexican Grill .
Cramer pointed out that, of course, investors don't have to invest in companies that are affected by higher commodity costs. Companies like Apple , LimeLight Networks , ARM Holdings and Skyworks Solutions are some of his favorites.
When this story was published, Cramer's charitable trust owned Apple and Vale.
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