When a company reports weak results, Jim Cramer is frequently asked by investors how to price that disappointment into the market. How do you know when the weaker results could be indicative of a larger trend and the whole group should be avoided?
It was this exact confusion that overwhelmed the market on Thursday, and Cramer thinks it was justified.
There was the curious case of NXP Semiconductors, the play on the Internet of things. It gave shockingly cautious guidance, saying that it would cut prices for semiconductors across the board. As a result, its competitors Avago and Skyworks were clubbed as well for guilt by association.
"My take? There should be no pin-action here. NXP Semi has issues that others might not have," Cramer said.
The guidance made no sense to Cramer based on what he has heard from the other chip companies that he follows. That is why he recommended buying the group, not sell it, even though Avago and Skyworks are too risky for his taste right now.
As for talks of a merger between Allergan and Pfizer, Cramer added that Allergan is too cheap to sell. Unlike Valeant, which has a tremendous amount of problems, and he thinks it is too difficult for investors to own right now.