CNBC’s Jim Cramer said Wednesday that investors should look to profitable companies for potential buying opportunities following another tech-driven sell-off.
“A lot of the companies that came down yesterday … were really really good companies, and I think you have to start buying them,” Cramer said on “Squawk Box” before the market opened. He noted Airbnb as an example of a recently weaker but profitable name that stands out.
Cramer added buyers should avoid what he calls “clown companies” and invest their money elsewhere.
“Look at any company that became public since 2018, we almost want to sell all of them, they’re the ones that are pre-revenue, which is a hilarious term I haven’t heard since 2000,” Cramer said, referring to 2000 — when the late 1990s dot-com bubble burst. The Nasdaq lost roughly 80% of its value in the two years after the bubble broke. Many companies with dubious financial prospects came public during that period and later failed.
The “Mad Money” host drew parallels to the present-day SPAC craze, which makes it easier for firms to become publicly traded stocks through mergers with special purpose acquisition companies.
Cramer also said that he’s rebelling against many of the narratives being given as reasons for the recent stock slides. Growth stocks, many of them tech names, have been hit hard by rising bond yields, which make it more expensive to borrow to expand.
The major averages rose in volatile trading Wednesday, a day after the Nasdaq posted its lowest close in three months. On Tuesday, the Nasdaq fell more than 2%, while the Dow and S&P 500 each dropped more than 1%.
Cramer called out market naysayers for trying to have it both ways when it comes to expectations that the Federal Reserve will raise interest rates four times this year among other monetary policy-tightening measures. “The bears are saying if they raise it four times it’s bad for Bank of America but if they don’t raise it, it’s bad for Bank of America — forget it,” he said.
Bank earnings tend to improve when rates go higher. Shares of Bank of America, which have gained nearly 45% in the past 12 months, rose roughly 2% on Wednesday on better-than-expected quarterly earnings.
Buyers should cut through the chatter and spot the companies that are doing well, Cramer said.
“We gotta start thinking about individual companies … like Warren Buffett, man, he’s probably sitting there laughing at us,” Cramer said, invoking the Berkshire Hathaway billionaire as the standard bearer for picking winning blue-chip stocks.
“I want to be in companies that make things, do things, and get paid for them, and are profitable. It’s a pretty simple message,” Cramer said later on “Squawk on the Street,” echoing his 2022 playbook for investing in companies with tangible products and results.