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Supermarket Sweep

The 2009 performance of a couple of the most recognizable supermarket chains might confuse investors at first glance, Cramer said Wednesday. Trying to figure out what that means for the overall market might cause even more head scratching.

Whole Foods is up a whopping 85% this year, while Kroger is down 19%. Recession or not, Wall Street seemed to think high-priced organic foods offered better returns than a classic downturn play. The question, though, is what this means for the coming quarter. Will investors continue to seek out traditional defensive names like Kroger until the economy turns up? Or do investors think the turn has already happened, so they are looking for momentum names instead?

Well, Cramer leaned toward the latter. On a micro level, Kroger is taking share, increasing its margins and keeping prices low to compete with Wal-Mart. The only reason that investors would dump their Kroger shares is if they thought we were coming out of a recession.

The move in Whole Foods is less obvious, though Cramer still thinks it has more to do with Wall Street’s bullish outlook for the economy than actual company performance. Sure, beating earnings expectations last quarter was a big plus for Whole Foods after years of declines. And the dividend cut showed just how serious management was about keeping costs contained. But this wasn’t enough to warrant an 85% jump, Cramer said.

Given the action in these two stocks, it appears investors are less concerned with a recession than before, and might even think we’re on the up and up again. That, of course, doesn’t mean Whole Foods is a buy and Kroger should be sold. In fact, Cramer thinks just the opposite is true. Holders of WMFI should take profits, he said, to lock in some of those gains.

In the end, though, the point is only to illustrate what the market sentiment is right now and how viewers should plan accordingly. What stocks are bought or sold is entirely up to them.


Cramer's charitable trust owns Wal-Mart.

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