CNBC's Jim Cramer said Thursday that investors should look beyond the market's hottest trades and start looking for opportunities in areas that have already been beaten.
“I want to praise the other parts of the market … that have already been marked down, making them less vulnerable,” the “Mad Money” host said.
With the S&P 500 and Nasdaq Composite Hitting new highs recently, Cramer warned that some parts of the market, particularly technology, may be overheated and susceptible to sharp pullbacks.
Instead, he pointed to what he called the “cold” side of the market: healthcare stocks that have been discounted despite their strong fundamentals.
Cramer highlighted four healthcare companies that he believes are being overlooked and will help add diversification to portfolios.
he likes it CVS Healtharguing that the company is benefiting from a changing competitive landscape as rivals such as Rite Aid disappear and Walgreens shrinks. With its Aetna insurance division and thousands of retail locations, he said CVS is well positioned to gain market share as competition fades.
Cramer also noted Cardinal Healthwhich he said, “has been wiped out here for no reason other than, I think, a cruel rotation out of health care.” The company is moving beyond its traditional role as a drug distributor into higher-growth services, particularly supporting specialty medical practices.
Another name on your list is Johnson & Johnson. Cramer emphasized its strong balance sheet and said it has “the best pipeline of potential blockbusters of any pharmaceutical company.”
Finally he called UnitedHealth Groupwhich recently generated strong profits. Cramer said the return of CEO Stephen Hemsley, who was boss from 2006 to 2017, has helped stabilize the business and restore confidence in its ability to deliver consistent growth.
Cramer's broader conclusion is that investors need to have a “good balance” in their portfolios. After such a powerful AI-driven technology race, he said, investors may soon need it.
Disclosure: Cramer's Charitable Trust, the portfolio used by CNBC Investing Club, owns shares of Cardinal Health and Johnson & Johnson.
