CNBC’s Jim Cramer on Wednesday made a case for investors to choose individual stock picking over index funds going through market turmoil.
The “Mad Money” host laid out a “shelter-in-place” list of companies that he projects can cut through the global economic challenges set off by the coronavirus pandemic.
“For years, lots of very smart people … told us that index funds were really the best if not only way to invest,” Cramer said. “But sometimes trying to mirror the market is a bad strategy” because “you have to own so many have-nots along with the haves.”
The S&P 500, an index of 500 large-cap stocks that is largely representative of activity on Wall Street, is down more than 15% from its closing high nearly two months ago. The stock average fell another 2.2% to 2,783.36 during Wednesday’s session.
The S&P 500’s performance is influenced by both the worst decliners, such as Norwegian Cruise Line, which is down nearly 80% this year, and the top gainers, such as Regeneron Pharmaceuticals, which is up 36% this year.
To beat the market and maximize returns, Cramer said investors opting to pick individual equities must do the research and make picks that work in the current environment.
“Rule No. 1 for the new abnormal is that you stick with the winners and you leave the raggedy rest to the others,” he said.
Below are Cramer’s recommendations and thoughts for the stay-at-home portfolio:
Netflix: “If the pandemic doesn’t calm, they may have trouble making new content, but right now the momentum is here, based on prospective sign-ups, and it’s extraordinary.”
Activision Blizzard: “Activision Blizzard has some hot titles.”
Take-Two Interactive: “Take-Two Interactive … missed its last quarter. CEO Strauss Zelnick … committed to making sure that didn’t happen again.”
Nvidia and Advanced Micro Devices: ”These new games require powerful hardware. Nvidia and AMD make the best graphics chips. Both stocks have been roaring.”
Amazon: “This is the ultimate shelter-in-place stock, which is why it hit an all-time high today,” he said. “Plus, their Web Services division dominates the cloud infrastructure space, something we need more of now than ever because everyone is online.”
Domino’s Pizza: “I bet they take this opportunity to wipe out many of their mom-and-pop competitors.”
Constellation Brands: “We know liquor sales are way up. The numbers from Constellation Brands are extraordinary.”
Dollar General, Walmart and Costco: These are “some of the few retailers that actually work here because they carry all the essentials and their prices are so darned low.”
Campbell Soup, Mondelez, PepsiCo, Conagra Brands and McCormick: ”We know people are stocking up their pantries with food and snacks.”
Zoom Video Communications: “I know they’ve taken some security hits … [but] look, their platform’s become indispensable.”
Roku: “Their platform’s the best way to watch all your favorite streaming services on your TV.”
Disclosure: Cramer’s charitable trust owns shares of Costco, Amazon, Nvidia, PepsiCo and Take-Two Interactive.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer’s world? Hit him up!
Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram
Questions, comments, suggestions for the “Mad Money” website? [email protected]