Cramer: Rotation to Create Opportunity in Clorox?

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What do you do with a stock like Clorox, a classic defensive stock that's gained more than 15% ytd and pays a 2.95% yield?

"Clorox makes top notch products and has fabulous management," reminded Cramer. "Don Knauss, the chairman and CEO of Clorox is among the most bankable executives across all of Corporate America."

Those are the kinds of bullish fundamentals that Cramer always likes.

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However, there's a a rotation underway in the stock market in which pros are rotating or cashing out of slow-and-steady consumer staples stocks and putting money to work into cyclical stocks that do better when the economy is improving.

It's ironic, but the improving economy has worked against Clorox' share price in the near-term. Since mid-April Clorox is about 4 points off their highs.

Cramer, however, doesn't advocate investing for the near-term. He's a long-term investor with a time horizon of a year or more. Therefore, to make an informed decision about the recent decline he turned to the company's most recent earnings release for insights.

On May 1st Clorox reported a better-than-expected third-quarter profit but sales missed estimates.

Looking at the numbers a little more closely, net earnings for the quarter ended March 31 were $134 million, or $1.00 a share, compared with $134 million, or $1.02 a share, a year earlier. Excluding items, it earned $1.06 a share, while analysts, on average, expected $1.05, according to Thomson Reuters I/B/E/S. Sales rose 0.7 percent to $1.41 billion, falling short of the average analyst estimate of $1.44 billion.

"For the full fiscal year, I'm confident in the plans we have in place to deliver our earnings outlook," CEO Knauss said at the time.

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As Cramer parsed through earnings his big takeaway was that "Clorox gave a strong outlook for the full 2013 fiscal year," he said. "Outlook is what I care about most."

Therefore, the rotation in the market may actually be an opportunity. Although Cramer never advocates chasing a stock, in situations such as these he recommends identifying an entry point and then pulling the trigger strategically.

"Again, Clorox makes top notch products, it has fabulous management and it yields 2.9%," Cramer said, "and it gave a strong outlook." That what matters most.

"Personally, I wouldn't jump in and out of Clorox, said Cramer, "you can generate strong returns by reinvesting the dividend."

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