Mad Money

Cramer: Put recession fears aside and buy these 2 office furniture stocks

Key Points
  • A tight labor market means companies need to find ways to make their offices attractive to prospective workers, CNBC's Jim Cramer says. 
  • "That's why I think Herman Miller and Steelcase, as boring as they are, are both worth buying," the "Mad Money" host says.
  • Falling commodity prices also have allowed the Michigan-based companies to avoid the brunt of the U.S.-China trade war, Cramer explains.
Herman Miller, Steelcase buys, despite recession fears, says Jim Cramer
Jim Cramer: Buy stocks of furniture makers Herman Miller and Steelcase

U.S. businesses may be showing some signs of weakness, but that shouldn't scare you away from buying the stock of two office furniture companies, CNBC's Jim Cramer said Thursday.

Not only are Herman Miller and Steelcase are defying conventional wisdom, but they also have room to continue rising, the "Mad Money" host contended.

"As long as the job market stays strong, companies will keep paying up to make their workspaces more attractive and entice the workers they need," Cramer said. "That's why I think Herman Miller and Steelcase, as boring as they are, are both worth buying."

Herman Miller, a Zeeland, Michigan-based maker of high-end office furniture, has seen its stock rise 52% for the year, Cramer noted. It closed at $45.98 on Thursday.

Steelcase, which is based in Grand Rapids, Michigan, and is a leading supplier of products for the office environment, is up 24%, Cramer said. Its stock was at $18.40 at Thursday's close.

Cramer said there are two main reasons why the companies are having success, despite recession fears and the U.S.-China trade war.

The first is the tight labor market. Currently, the U.S. jobless rate is 3.7%.

Compared with other business expenditures, "fancy office furniture is tied much more, much more, tightly to the labor market," Cramer explained.

"A tight labor market means workers have more leverage, and when workers have more leverage, they get the nice office chairs with lumbar support," Cramer said, alluding to Herman Miller's Aeron chairs.

The second factor, Cramer said, is better execution and falling commodity prices, which has allowed the furniture makers to be hurt less by tariffs. Both companies do a lot of sourcing from China, Cramer said.

"In fact, in a perverse way, the tariffs might be helping, because they're contributing to the worldwide slowdown that's driving down commodity prices, giving Herman Miller and Steelcase lower raw costs," Cramer said.

Perhaps the thing Cramer likes most about the two companies? They are still "absurdly cheap, selling for about 12 times next year's earning estimates," Cramer said.

"In a market that's increasingly wary of high-flying stocks with nosebleed valuations, these two value plays could be just what the doctor ordered," Cramer said. "This is the opposite of Peloton. This is the opposite of Smile Direct [Club]."

Last week, both Herman Miller and Steelcase beat earnings expectations. In addition, Herman Miller reported 7.4% sales growth compared with the same quarter last year, while Steelcase's revenue was up 14% in that same time frame.

That caught Wall Street's attention, but Cramer said he thinks the two companies are still worth buying.

"Even after last week's explosive rallies, I bet they can go higher still," he said.

Furniture makers Herman Miller and Steelcase are buys, despite recession fears, Jim Cramer says
Jim Cramer: Buy stocks of furniture makers Herman Miller and Steelcase

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