CNBC’s Jim Cramer said Monday that stockholders of household names should not be too quick to pull the trigger when they hit a rough patch because the market tends to be forgiving.
“When a company with a terrific long-term track record suffers a setback and the stock implodes, the pain can make you want to dump the stock and forget about it,” the “Mad Money” host said. “But as we’ve seen from Apple, Nvidia, and McCormick, these moments of extreme weakness and desperation, they tend to be terrific buying opportunities.”
Those three companies looked like “roadkill” at the beginning of the year, but Cramer said the stocks have since recovered their losses.
Cramer often says that Apple, led by Tim Cook, is a stock that investors should buy and not sell, even if it gets difficult to hold the security. The stock price plummeted from $233 to $157 during the fourth-quarter bear market amid concerns about slowing iPhone sales, which account for more than half of the company’s business, he said.
Since bottoming out in January, the stock has jumped 40%. Cramer said the fall and rise resembled a pullback to $93 in 2016. Apple’s stock price, along with many other companies, should not have dropped so much at year-end and now the tech giant is taking strides to show that its focus on services and subscriptions will work out, the host said.
Furthermore, Cramer agrees with Morgan Stanley analyst Katy Huberty’s assessment that investors should not underestimate Apple’s jump into health care.
“Apple’s more than a gadget maker and this idea’s finally gaining traction,” Cramer said. “Plus, even after this move, the stock’s darned cheap. It sells for 15-times earnings. Hey, remember [what] Tim Cook said, he told us that his legacy would be health care.”
Apple isn’t the only company to bounce back from short-term pain. Previously one of the hottest stocks on the market, Nvidia collapsed to $124 in late December from its highs of about $292. Cramer said the plunge was prompted by the troubles that hit the cryptocurrency sector, which generated a lot of business for the chipmaker.
Nvidia makes semiconductors for many industries, including: gaming, data centers, cryptocurrency mining, and artificial intelligence. The stock was too expensive at $292, but Cramer said it was too cheap to ignore after the collapse. He added shares to his ActionAlertPlus.com charitable trust. It closed north of $191 on Monday.
“The world was ending. The company had some temporary problems that they’re now working through, which is why the stock has caught fire again,” Cramer said.
Outside of the technology industry, McCormick also fell rapidly during the fourth quarter sell-off. The seasoning producer’s stock declined from $156 to $139 in December and again to $124 in January after disappointing earnings in January and tepid 2019 guidance, Cramer said.
Shares of McCormick later bottomed at $120 and have since climbed above $153.
“At this point, McCormick is trading like that disappointing quarter never happened … And most of this rally happened on no real news,” Cramer said. “McCormick was boosted by a broader rotation back into packaged food stocks, even though it doesn’t have much of a dividend compared to the likes of General Mills or Mondelez.”
McCormick beat expectations in its earnings report two weeks ago, which helped to restore confidence in the company, the host said.
“We have seen the same pattern from Home Depot. We’re seeing it from Nike right now, which I think is a serious buy. Dow Chemical last week,” Cramer said. “Stocks that were left for dead and then came roaring back once people realized that they weren’t dead.”
Disclosure: Cramer’s charitable trust owns shares of Apple, Nvidia, and Home Depot.
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