Mad Money

Cramer: These 'Disappointers' Now Work

Cramer: Risk On, Risk Off? Forget About It!

Stocks tumbled Monday, triggered by concerns that Europe was far from resolving its debt crisis. The Dow sunk 163 points, the S&P gave up 1.5 percent and the NASDAQ declined 1.3 percent. But there are themes that are working, even in this perilous market, “Mad Money” host Jim Cramer said.

“You have to be clever about what this market really wants,” he said. “Risk on, risk off is for the non-homework doing gunners who will far more than likely make no money at all.”

Cramer has repeatedly said that this market likes dividend-yielding stocks and master limited partnerships. But he said the market also likes “commodity-using disappointers”—disappointers that can get better in the future.

Before the rash of semiconductor related blow-ups, it was the food group who produced the most disappointments quarter after quarter. Yet while a vast majority of this group failed to meet their estimates or had their projections cut, their stocks have come roaring back.

For example:

  • ConAgra Foods reported a “nauseating quarter” on September 20. The stock, however, has since climbed back up.
  • McCormick delivered weak gross margins and Credit Suisse said “Not Thyme to Buy the Stock.” However, the stock has since moved higher.
  • Kellogg was downgraded to ‘hold’ from ‘buy’ by Deutsche Bank, yet shares are back up.
  • Heinz , perhaps the worst of the group, had disappointing sales. It bottomed and has been climbing up.
  • Campbell Soup reported “horrible” sales but shares recovered and are now higher.
  • Tyson Foods had a “total miss.” The stock, however, has since headed higher.

The reason, Cramer said is that companies are doing better because their commodity costs are coming down.

“It tells you that a European slowdown doesn't make all stocks unattractive … it actually makes some stocks more attractive than others, like the food group,” he said. “Especially since many of these companies have put through price increases that are sticking at the same time that the raw costs are coming down.”

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