- "Mad Money" host Jim Cramer surveys the 15 newest companies to reach $100 billion market caps and points out the best investments in the group.
Over the years, CNBC's Jim Cramer has found that in a bull market, the winners tend to keep winning.
So as stocks slid on Wednesday following the Federal Reserve's interest rate hike, the "Mad Money" host unveiled a new way for investors to find high-quality companies with long-term prospects: the $100 billion club.
His concept was simple: to examine public companies that have reached market capitalizations of $100 billion or more in the last 12 months.
"Why should we care about these mega-cap stocks? Because unlike an index, the $100 billion club isn't selected by anyone. There's no nominating committee. The only way a company gets its name on this list is by producing years and years of gains," Cramer said.
"In the last 12 months, this club has seen 15 new members," he continued. "That's a lot, and it turns out this list is a veritable who's who of what's working."
And based on the company's recent performance, Cramer figured "it's not going to stay there."
"The whole idea of this merger, masterminded by the brilliant [DowDuPont CEO] Ed Breen, ... was that it would only be the prelude to a three-way breakup," he explained. "Dow and DuPont would join forces, then split up the combined company to create an agriculture giant, a specialty products kingpin and a materials science titan."
Breen, the former CEO of DuPont and of Tyco who led the latter through a 10-year unwinding, and his colleagues expect the three-part spin-off to occur in 2019.
"Given the tremendous amount of value Ed Breen created by breaking up the Tyco company back in the day, I am very much a believer in this story," Cramer said. "I would be a buyer right here."
Second up was Cramer-fave chipmaker Nvidia, which builds semiconductor products for artificial intelligence, video gaming, self-driving cars and other cutting-edge industries.
In three years, Nvidia has gone from being a $15 billion company to a $159 billion giant and the 30th-largest company in the .
"Here's the thing: Jensen Huang, the CEO, is the man with the plan. He started laying the groundwork for Nvidia's recent transformation a decade ago," Cramer said. "In the old days, they were just the preeminent maker of graphics processors, the chips that let you play cool-looking video games. ... Now that the gaming space is so big, Nvidia has also found other sorts of new uses for its products."
That, Cramer said, has enabled Nvidia to accelerate its revenue growth and deliver some "staggering earnings beats" since its 1999 initial public offering.
"It's an amazing story," said Cramer, who affectionately renamed his rescue dog to Nvidia. "Ideally, you want to wait so you can get a pullback. And Nvidia does get pullbacks, usually because someone slags it for being up too much."
When Nike reached $100 billion in 2017, Cramer didn't see it so much as a "welcome to the club" moment, but a "welcome back to the club moment," he said.
But as other retail stocks started to rise toward the end of the year, so did Nike. Shares of the athletic shoemaker are now up nearly 50 percent from their October lows.
"Now, Nike reports later this month and it has a tendency to sell off even on good numbers, so that might be your moment to pounce," the "Mad Money" host told investors.
"Texas Instruments is the world's largest maker of analog chips — that's the kind that control real-world things like speed, sound [and] voltage — and they make tons of micro-controllers for the internet of things," Cramer said. "Best of all, this company is a voracious re-purchaser of its own stock. When it gets slammed, you know they're in there buying it with you."
The largest U.S. railroad operator joined the $100 billion club last year, climbing to $145 billion since. Cramer attributed the company's recent strength to tailwinds from rising transportation costs and the potentially decreasing likelihood of a U.S.-China trade war.
It could be "the market's way of saying we shouldn't be too worried about a trade war with China because Union Pacific does tons of business moving Chinese shipping containers from the West Coast to the rest of the country," Cramer said.
"We just heard from CEO Lance Fritz a few weeks ago and I liked what he had to say," he continued. "The next time the transports pull back, you might want to think about doing some buying of Union Pacific. The company's got a monster buyback, they'll be in there with you."
"Hock Tan, the CEO, is fabulous at executing these takeovers — it's just too bad the Trump administration wouldn't let him buy Qualcomm," Cramer said. "Broadcom can be tough to own, though, as they're a big Apple supplier and investors are constantly fretting about reduced iPhone production."
At $102 billion, industrial conglomerate United Technologies has been a victim of investors' worries about China cracking down on U.S. companies operating in its country.
"The PRC is a major source of growth for the company," Cramer warned. "But United Technologies is firing on all cylinders here, especially its aerospace business, and the company may break itself up to unlock value. Whatever they decide — and I think they will indeed break up after the Rockwell Collins deal closes — I trust CEO Greg Hayes to do the right thing."
United Parcel Service, commonly known as UPS, entered the $100 billion club late last year, only to exit during the early 2018 marketwide sell-off and re-enter as stocks recovered.
"I have to say, as much as I like the transportation companies that benefit from the rise of e-commerce, I'm not that excited about UPS," Cramer admitted. "There are simply better logistics plays like XPO [Logistics]."
Shares of Netflix hit a 52-week high on Wednesday, bringing the streaming media giant's market cap to over $165 billion. The stock is up over 95 percent just for 2018.
With strong subscriber growth and a burgeoning library of original content, Netflix has become a force to be reckoned with in the media industry despite analysts' concerns about its valuation.
"Every time Netflix's market capitalization surpasses another old-school media titan — the latest being Disney — you hear that it's too expensive," Cramer said. "This argument has led you astray every single time and I think it fundamentally misunderstands what Netflix is doing. They're not just another media company, they're upending the entire industry."
But Cramer doesn't like chasing stocks, and with Netflix's at nearly $380 a share, he could understand why investors might hesitate to buy.
"Ideally, I'd wait for a pullback before buying more," he said.
The "Mad Money" host credited CEO Shantanu Narayen with reinventing the digital media company, touting its key role in the world of e-commerce and its cloud-based business model.
"Can the stock keep roaring? Well, Adobe reports tomorrow night so we'll find out soon," he said. "The expectations have been somewhat elevated of late, but that's nothing new and they've got a history of beating numbers."
Cramer also applauded the CEO of Abbott Laboratories, a medical device maker specializing in blood screening and nutrition management, for driving the company past the $100 billion mark.
"Abbott's CEO, Miles White, ... has done a masterful job of unlocking value over the years, including the spin-off of AbbVie, the drug business," Cramer said, adding that Abbott's $25 billion acquisition of St. Jude Medical handsomely benefited the company and its stock.
"My view? I like Abbott Labs a lot," he continued. "The company's got a bunch of new products in the works and it has an incredibly consistent track record. When it comes to earnings, Abbott has either met or exceeded Wall Street's earnings estimates every quarter for more than 10 years."
And while the stock is still near its year-to-date highs, Cramer said he'd still support buying more.
The "Mad Money" host wasn't surprised when information technology consulting play Accenture crossed the $100 billion threshold this year.
As a well-run company that helps businesses upgrade their systems to be able to work with the cloud and other advanced technologies, Accenture is a direct beneficiary of the rise of the cloud, Cramer said.
"So if you like this story, you might get a better buying opportunity when Accenture reports again in two weeks," he added.
"I don't dislike this one, but I do think there are better opportunities out there," Cramer said.
With stunning revenue growth, Cramer wouldn't be surprised if the customer relations management colossus can reach its $20 billion revenue target in even less time than expected.
"My advice? Pray for a pullback [that] lets you buy this one into weakness," he said of the stock. "It's a terrific stock to own on a multi-day, Fed-inspired sell-off."
"Thanks to the leadership of CEO Dan Schulman, PayPal proved them wrong by partnering with the very companies that were supposed to destroy it," he said. "I think the stock has more room to run."
After reviewing the $100 billion club's 15 newest members, Cramer realized that investors don't always need to look for under-the-radar names to find the best investments. Sometimes, the big winners are right in front of you.
"Here's the bottom line: when it comes to the newest members of the $100 billion club, I say dance with the one that brung ya," he said. "These executives have created tremendous value here and I bet they're going to keep doing it. May seem like a silly way to pick stocks, but in a bull market, winners tend to keep winning and nothing says success [like] joining the $100 billion market capitalization club."
Disclosure: Cramer's charitable trust owns shares of DowDuPont, Nvidia, Apple, Abbott Laboratories, Salesforce.com and PayPal.