- "You need to accept that this [Fed-induced] rotation is happening. It's what's driving these stocks," CNBC's Jim Cramer says.
- "When this kind of rotation gives you a pullback in a group like the 'Cloud Kings,' that's a long-term buying opportunity," the "Mad Money" host says.
- "Just remember that you can afford to take your time ... [because] I don't think" the rotation has ended, he says.
Investors should add Jim Cramer's so-called "Cloud King" stocks to their shopping list as the stock market awaits an interest rate cut by the Federal Reserve later this week, the "Mad Money" host said Monday.
Money has been rotating from high-quality growth names into the industrial sectors as Wall Street bets that a quarter-point rate cut will spur more business investment and give a boost to cyclical and industrial companies.
That explains why the Dow Jones Industrial Average, which tracks 30 large blue-chip stocks, gained nearly 29 points during the session Monday. The S&P 500 and tech-heavy Nasdaq Composite slipped 0.16% and 0.44%, respectively.
"You need to accept that this rotation is happening. It's what's driving these stocks," Cramer said. "The Fed's rate cut will push money out of the 'Cloud Kings' and into the industrials, but your job is not to trade around a rotation: it's to find high-quality stocks and stick with them for as long as the underlying business stays strong."
Cramer said the "Cloud King" group of hot-tech stocks, which includes names such as Salesforce, Workday, VMWare, Adobe and Twilio, rarely pulls back enough to give investors an ideal entry point. These stocks are riding a secular trend and will perform well, despite worries of an economic slowdown, he said.
Workday and Adobe shed more than 1% of their respective share prices during the session, while Salesforce dropped 2.35%. Twilio plunged more than 5%.
The central bank on Wednesday could cut interest rates for the first time in more than a decade, an idea that's also supported by former chair Janet Yellen. The current benchmark rate stands at 2.25% to 2.5%. Fed Chair Jerome Powell initially planned to continue raising rates in 2019, but shifted his outlook in the months following a rate hike last December that induced a brutal market-wide sell-off.
"When this kind of rotation gives you a pullback in a group like the 'Cloud Kings,' that's a long-term buying opportunity," Cramer said. "Just remember that you can afford to take your time ... [because] I don't think" the rotation has ended.
Disclosure: Cramer's charitable trust owns shares of Salesforce.com and Twilio.