CNBC's Jim Cramer said Monday that investors should not fear the latest market rotation. Instead, he believes he is creating buying opportunities in several high-quality stocks that have fallen due to institutional selling.
“If you can spy on a rotation and figure out what the theme might be, you can identify some incredible stocks,” the “Mad Money” host said.
Monday's action followed last week's June jobs report, which noted a slowdown in hiring from the previous month. Cramer said that led some big money managers to reposition their portfolios. Because many institutional investors trade baskets of stocks tied to a particular economic theme, he said, quality companies can be dragged down even when nothing about their business has changed.
“These rotations create dislocations that seem to come out of nowhere. And sometimes those dislocations can provide incredible opportunities to buy high-quality companies at a discount,” he said. “Today we have a lot of them.”
Cramer pointed out PepsiCosaying the recent pullback has erased much of the rally that followed its strong earnings report last quarter and created an attractive entry point ahead of the company's July 9 results.
He presented a similar case for starbucksarguing that investors finally have a chance to buy the stock after its recent decline as CEO Brian Niccol continues to work on the company's turnaround. Cramer's Charitable Trust, the portfolio used by CNBC Investing Club, owns shares of Starbucks.
For investors willing to take on more risk, Cramer noted constellation marks. He said the alcohol company's recent earnings suggested its beer business could be stabilizing despite continued concerns around spirits.
Cramer said he “can't think of a more advantageous place to shop.” TJX Companiesanother holding company of the Club. He argued that a weaker consumer tends to benefit off-price retailers as shoppers reduce their prices, while excess inventory at traditional retailers gives TJX more discounted merchandise to sell.
Away from consumer stocks, another dynamic that characterized Monday's action was a rally in artificial intelligence winners at the expense of healthcare stocks that had been performing well. That includes ownership of the Club. Johnson & Johnson. Cramer said the company is now an “exclusive pharmaceutical company” after spinning off. Kenvueits consumer health business, a few years ago and is planning to move away from orthopedics. It said those changes make it a more attractive business ahead of its July 15 earnings report.
“Shares of J&J, Pepsico, Starbucks, Constellation Brands and TJX took a hit today,” Cramer said. “I think this is a great place to make some purchases, because they are all collateral damage of this indiscriminate selling of sector rotation.”
