The big Wall Street pivot continues, and it's funded by money managers selling all your favorite tech stocks. Those were Jim Kramer's cautionary words to Mad Money viewers on Monday. Technology stocks are still growing, but this market just wants value.
Time to retire FAANG, Cramer's abbreviation for Meta (FB) - Obtain a Class A report from Meta Platforms Inc.Amazon (AMZN) - Get an Amazon.com, Inc. report.apple (AAPL) - Get the Apple Inc. report.Netflix (NFLX) - Get a Netflix, Inc. report. and the alphabet (The Google) - Get the Alphabet Inc. report. from first class. Simply put, FAANG is not thriving in business with high inflation and high interest rates, which is what we are likely to achieve for the foreseeable future.
While it is true that some commodities have already peaked, the reality is that the Russian invasion of Ukraine is likely to keep food and energy prices high. China's Covid lockdowns are adding to the supply chain woes, and there is no relief in sight for labor or shipping rates anytime soon.
Cramer told viewers that they need to use any market bounce to reduce their exposure to technology and focus instead on money center banks, lubricants, scale retailers, health insurance companies and major drugstores. It's time to forget about FAANG, forget about technology, and forget about biotech until these segments become cheaper than the rest of the market.
“I hate this pivot,” Kramer concluded, but with the money managers put back in, we have no choice but to pivot with them.
Affordable growth
Tech stocks may be unfavorable on Wall Street, but that doesn't mean all growth should be avoided. Cramer reintroduced viewers to GARP, or Growth At A Reasonable Price, an old and entirely forgotten investment style that is back in fashion in a big way.
GARP simply means looking for companies that are not only growing, but also growing with a share price that matches market conditions. Cramer has started a week-long streak to find stocks that fit the GARP model, starting with the travel and leisure sector.
After applying several screens to the travel inventory, Kramer identified six screens that fit the GARP model. Both from Expedia (EXPE) - Get an Expedia Group, Inc. report. and collect collectibles (BKNG) - Get a Booking Holdings Inc. report. They reopen stocks that have had significant growth. Expedia is trading at up to 24x earnings, while Booking is a 20% discount on its previous highs. Marriott (March) - Get a Class A report from Marriott International Also fits the bill, trading at 30 times profit, but at a high growth rate as travel resumes.
Investors can also take a look at Walt Disney (dis) - Get the Walt Disney Company report As GARP stock, it trades at 22 times earnings with significant growth expectations. Closer to home, investors may want to consider Darden restaurants (DRI) - Get Darden Restaurants Company Reportwhich is trading at 17 times earnings with a dividend of 3.5%, or Sysco food distribution company (the reason) - Get a Sysco Corporation reportwhich is trading at a profit of 28 times.
All of these stocks give you tech stock growth, but at a more reasonable valuation.
Play interest rates and inflation
Looking for another way to play with rising interest rates and inflation? One of the best kept secrets in this market isn't tech stock or oil play, it's Hershey Foods (HSY) - Get the Hershey's reportThe best performing stock of packaged foods.
For many years, Hershey was a poor performer, but that all changed in 2017, when Hershey's new CEO focused on growth, acquisitions, and returning cash to shareholders. Hershey's has since returned 105% over the past three years thanks to clever acquisitions like Skinny Pop and Pirate's Booty.
Go to follow
Unlike most packaged food companies, Hershey's has 45% gross margins, and as Easter approaches, Kramer said he'll be a buyer here and buy more at any market weakness.
Retail sector update
For the latest reading on the retail sector, Kramer spoke with Matthew Bos, president of retail stores at JPMorgan Chase & Co., and specialty stores, following the annual Retail Report event.
The most important take away from this year's report, Bos said, is consumer resilience. Some sectors, such as homes and furniture, are under pressure, but the overall environment is quite robust and wages are higher.
Boss said companies like the dollar general (DJ) - Get the report of the Dollar General Corporation and five below (five) - Get Five Below, Inc. Report They thrive on the low end, while brands with pricing power, like Nike (from) - Get a Nike, Inc. report. from class BLululemon Athletica (lulu) - Get Lululemon Athletica's report Levi Strauss (fibrous) - Obtain a Class A report from Levi Strauss & Co. flourish too.
Boss added that retailers are still working hard to achieve pre-pandemic revenue levels, but are doing so with stronger balance sheets that include less debt, higher gross margins and ultimately greater profits.
lightning round
On the Lightning Tour, Kramer was bullish on Draft Kings (DKNG) - Get a Class A DraftKings Inc Report Waltria (MO) - Get the Altria Group Inc . report.
Kramer has been tough on SoFi Technologies (Sufi) - Get a SoFi Technologies Inc . report and Editas Medicine (Modify) - Get Editas Medicine, Inc. a report.
The great liberation
In the "No Huddle Offense" segment, Kramer said he forgets about the "Great Resignation", and instead considers it the "Great Liberation".
Most people did not quit their jobs and disappear into a void, they reevaluated their lives and many of them started their own businesses. That's why services like Shopify (store) - Get Shopify, Inc. First class report and Etsy (ETSY) - Get an Etsy, Inc. report. There is high demand, even if their stock prices do not reflect this.
The pandemic has also changed where people choose to live, and how they choose to obtain their goods and services, think DoorDash (dash) - Get a Class A report from DoorDash, Inc.And for those who chose to stay in their jobs, it gave them more bargaining power.
There is a reason why employees at Starbucks (SBUX) - Get a Starbucks report Kramer concluded that Amazon is beginning to unite, and the great liberation is upon us which is a good thing.
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