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How Jim Cramer navigates a market selloff
CNBC’s Jim Cramer offered advice on how to deal with declines, using Tuesday’s down session as an example. He encouraged investors to use widespread losses as a buying opportunity, pointing out that the indexes managed to rebound on Wednesday.
“If you trust the market, if you don’t believe that one stock controls the entire tape, if you don’t take counsel of your fears and you do take counsel of your opportunities,” he said. “A day like yesterday can be the way you finally get a chance to start wading in — not all at once, that’s for fools, but gradually.”
The major indexes fell on Tuesday, led largely by an 8% decline in Palantir and artificial intelligence stocks as investors worried about many of these tech companies’ bloated valuations. Palantir’s losses came just after it delivered a top-and-bottom line beat and gave stronger-than-expected guidance.
On a day like Tuesday, Cramer suggested it would be prudent to find a stock that just reported a good quarter but saw shares sink because of Palantir’s losses. He recommended choosing a company that investors are familiar with and have researched extensively.
He named two companies he thinks would be good to buy on weakness — Shopify and McDonald’s. Shopify is a large outfit that trades with the futures, Cramer said. He suggested its stock dipped on Tuesday because of the broad decline, not a problem with business, noting that management said it’s expecting a strong holiday season. Cramer said he wasn’t bothered by McDonald’s earnings miss, saying it’s a tough time for the restaurant industry as a whole. Unlike some of the burger chain’s peers, Cramer said McDonald’s has immense scale and strength and is making an effort to lower prices as consumer spending weakens.
“As we saw today, yesterday was a good time to start buying,” Cramer. “And even if you missed it, I hope you’ll keep this experience in mind the next time the averages get hammered.”
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