A terrible piece of Chinese manufacturing data sent U.S. stocks into a tizzy on Tuesday. Volatility soared, and the markets were off to their worst September start in close to 13 years. Amid all this mayhem, Jim Cramer remains unperturbed. That comes with experience of knowing that nothing is final in the markets.
Jim Cramer Says “Stay Calm”
Bear markets come and go, but the way investors perceive them remains the same. Jim Cramer thinks that since the decline accelerated a couple of weeks ago, most investors have panicked and offloaded good quality stocks. Contrast that with the disciplined operator, who has remained calm, and added great stocks, available at bargain prices, to his or her portfolio.
“Care more about the United States than China, given that we live in the United States, not China, and the two are very different despite the prevailing wisdom that if things are horrendous in the People’s Republic they must be horrendous here, too,” Cramer said on “Mad Money.”
Jim Cramer’s optimism is based on two important facts that most investors have overlooked. Firstly, the U.S. is heading into a presidential election year, which has historically proved to be a good year for fund inflows. And unlike 2011, Europe is in much better shape.
But markets rarely operate on logic. So don’t be surprised if the China scare leads to some more downside. Until then, Jim Cramer suggests focusing on stocks that are not directly dependent on China.
His top pick is Facebook Inc , which hit an intra-day low of $83. Cramer expects the social networking giant to earn as much as $4 per share by 2017. At current price that would add up to 27 times earnings. Sure, given the ongoing discount sale, it sounds pretty expensive. But investors also need to consider that the firm is growing at a more than impressive 30 percent a year. Cramer thinks paying $83 for a 27x company, growing annually at 30 percent, is a reasonable bet.
But since not every stock is Facebook Inc , Jim Cramer cautions investors to be more selective while picking growth names. When the market tide turns against, these very stocks are the ones that are hit the most. He cites the example of Zoe’s Kitchen – the much-loved Mediterranean themed restaurant chain. Once the darling of the Street, the stock has been battered out of shape in the past month.
Jim Cramer other pick is Kimberly Clark Corp . The stock is down more than 6 percent in the past one week. That was brutal for a firm whose business has remained virtually unchanged. In fact, the yield has gone up, and Cramer thinks the stock is strong buy.