CNBC's Jim Cramer on Tuesday advised that market players begin determining the pandemic-winning stocks that will be able to keep their shape in a post-pandemic world.
With vaccine rollouts underway, forward-looking investors are slowly switching their focus to reopening plays from stocks that benefit from a stay-at-home environment.
Cramer said now is the time to separate the sustainable Covid-19 winners from the unsustainable ones after many stocks put up big gains in 2020.
"Once we get this vaccination program under control, then the sustainable stocks should keep climbing, but the unsustainable ones will become un-ownable for the moment," the "Mad Money" host said, adding that "they need to be trimmed, if not sold, before Covid is beaten."
The comments come after stocks clawed back some of the losses suffered on the first trading session of the new year, when the major averages all declined more than 1%.
The blue-chip Dow Jones index advanced more than 167 points, one day after dropping about 382 points, closing at 30,391.60 for a gain of 0.55%. The S&P 500 climbed 0.71% to 3,726.86. The Nasdaq Composite rallied almost 1% to close at 12,818.96.
After the coronavirus pandemic plunged global markets into bear markets and economies into recession nearly a year ago, tech and other companies in the U.S. that benefited from an unexpected switch to remote work and schooling put up some of the largest gains last year. Pandemic investing that year was defined largely by Zoom, Peloton, Amazon and other companies powering the digital transformation.
As governments around the world begin distributing coronavirus vaccines in hopes of putting the deadly Covid-19 outbreak to rest, Cramer reiterated that investors should focus on companies tailored to powerful long-term themes.
Those themes include e-commerce, travel and leisure, digitization, cybersecurity, 5G, China relations, wealth management, remote work, health care and big retailers that are benefactors of stimulus spending.
Last year's winners had some spectacular rallies because people believe their strength is sustainable in a post-Covid world, Cramer said.
"I think we're giving way too many companies the benefit of the sustainable doubt, here. Many of these moves are not sustainable," he added.
The host offered his thoughts on a handful of companies. In the sustainable column he included DocuSign, PayPal and Johnson & Johnson. As for the unsustainable gainers, those include Peloton, Kimberly-Clark, Coca-Cola, Moderna, Pfizer and Square.
Cramer questioned the market's $43.4 billion valuation of Peloton. The stock enjoyed a 434% surge in 2020.
"While Peloton's got a great product," he said, "you better believe they'll take a hit once it's safe for people to go back to the gym."
Kimberly-Clark and Coca-Cola are household names and are reliable defensive stocks. Cramer, however, worries about their viability when the world puts the pandemic in the rearview mirror.
"I don't expect Kimberly-Clark or Coca-Cola stock to be sustainable investments right after Covid is conquered," he said. "Once the economy's roaring back, Wall Street will have no interest in these slow-and-steady growers."
Square was another triple-digit grower last year, jumping nearly 248% to $217.64 to close the year. While the company's payment systems are key for a digital world of money, Cramer worries the company faces steep competition.
"Square's in a very crowded business and while they're ... great at what they do, they've got no real moat," Cramer said. "It's only a matter of time, I believe, before the banks or other fintechs figure out their edge in point of sale and then duplicate it."
Disclosure: Cramer's charitable trust owns shares of Amazon and Johnson & Johnson.