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The best time to invest is when investors are concerned that increased labor and gasoline expenditures will negatively impact company profits ahead of earnings season, CNBC's Jim Cramer said Wednesday.
He pointed to an article in the Wall Street Journal titled "Investors Brace for Hit to Profits as Costs Rise" to counter worries that rising wages and energy costs would cut into earnings and threaten the bull market. That negativity is a reason to be bullish because those issues were already baked in the market, Cramer said.
"The more downbeat stories we see about the market, the more likely it will be that we'll have a decent earnings season. The averages can power higher because it's decent," the "Mad Money" host said. "Lowered expectations are the best kind of expectations."
In Delta Air Lines' case, the stock jumped 6 percent on Tuesday, and another 3 percent on Wednesday, on news that the carrier raised first-quarter earnings, he said. Because of better-than-expected revenues, the airline is forecasting earnings to fall in the 85 cents to 95 cents range, compared to the 80 cents that analysts expected. Stock traders thought Delta would have low traffic and higher fuel costs, he said.
"This was a fabulous move. It was fueled by, what, by negativity ... they expected Delta to have weak traffic and much higher fuel costs," Cramer said. "When the traffic turned out to be fabulous and the costs were fine, the short-sellers got crushed and the stock soared."
Cramer said Home Depot's stock took a hit following its most recent earnings report. The home improvement chain blamed its shortcomings on bad weather in February. The share price fell from $189 to $179, but Cramer argued that those trends have since reversed.
"Home Depot now trades at $198," Cramer said. "You had to buy it when everyone else was fleeing in terror. Now you have Home Depot's best-selling season right in front of them in the next two weeks ... because of gardeners and grillers alike."
Investors also reacted to headlines as opposed to listening to what Apple CEO Tim Cook had to say about the company, he said. Analysts in early January thought the best days of the tech giant were behind it because of weakness in China, but Cook thought that the long-term health of Apple was it as good shape as it had ever been, Cramer said.
"If you'd bought the stock when Tim Cook came on 'Mad Money' and told us business has never been better long-term, you would've gotten it at $150," he said. "If you'd listened to the headlines — the ones that bear a striking resemblance to what the Wall Street Journal is now saying about the whole market — you would've sold Apple and missed out on a terrific 45 point gain as the stock closed today at $195."
Cramer acknowledged that there will be some miserable quarters, such as the one Walgreens gave on Tuesday. The drug chain, however, is dealing with management issues and competition, he said. But Cramer's focus is on the companies that should be performing poorly because of a weaker economy, he said.
"I'm sure some companies really will be hurt by the economy or by rising gasoline prices and higher labor costs," he said. But when everybody's worrying about this stuff, that's the best time not to sell, but to buy."