It's getting pretty nutty out there, Jim Cramer admitted to his Mad Money viewers Wednesday, following yet another midday market reversal that included a wild, 900-point swing from peak to trough.
When the Federal Reserve tightens, it's always bearish for stocks, Cramer said, but that just means there are fewer opportunities out there. You just have to know where to look.
For all those bears out there, Cramer reassured viewers that Fed chair Jay Powell is a smart guy, and has no intention of wrecking the economy just to tamp down inflation. If you're investing in real companies with real earnings, you'll do just fine as interest rates rise, just as you always have.
But, Cramer reiterated, if you're invested in IPOs, SPACs or companies with no earnings to speak of, you must use any strength to sell as soon as possible. The Fed is not your friend if you own SPACs.
As for the rest of us, Cramer's earnings scorecard looked terrific, with 13 upside surprises compared to just four downside surprises. He said companies like Johnson & Johnson (JNJ), American Express (AXP), IBM (IBM), Microsoft (MSFT), Verizon (VZ), 3M (MMM) and Wells Fargo (WFC) are great to own. He would avoid Boeing (BA), General Electric (GE), Netflix (NFLX) and JPMorgan Chase (JPM), at least for the short-term.
Sell the junk and buy real earnings, Cramer concluded. That's the way to protect yourself in a market where the Fed is no longer your friend.
Where to Find the Bargains
Is it finally time to pick through the rubble and look for stocks where the selling has gone too far? Stocks do get cheaper as they go lower, Cramer reminded viewers, that's why he took a peek at the Russell 3000 index to see if there was anything worth buying.
In a volatile market, you need tough criteria. Cramer's first step was to only consider stocks that were big enough to talk about. That took the Russell 3000 down to 2,446 companies. From there, Cramer used a 50/50 screen, looking for stocks that were down more than 50% from their highs and were selling for less than 50 times earnings. This criteria yielded just 110 companies.
From there, Cramer used good old-fashioned homework to look at the company, it's business and outlook to make a determination. Among the companies larger than $10 billion, Cramer found just Etsy (ETSY), Enphase Energy (ENPH), Twitter (TWTR) and Pinterest (PINS) worth owning. In the $5 billion to $10 billion category there was just one, Upstart (UPST), that made the list.
Finally, among those companies trading at less than a $5 billion valuation, Cramer chose Bed Bath & Beyond (BBBY), Ollie's Bargain Outlet (OLLI), Revolve Group (RVLV), Torrid Holdings (CURV) and Cerence (CRNC).
Value Is Back
Value is back in style on the Wall Street fashion show, and that means new tech is out, but old tech is back in vogue. Nothing could be more "old tech" than PCs, which is why Cramer's back in love with HP (HPQ) and Dell (DELL).
Shares of Dell are up 150% since Cramer first recommended them in January 2019. The company has benefitted from the pandemic where both students and adults alike needed new PCs and laptops to work and study from home. Dell is also in a great cash position after spinning off VMware (VMW) for $9 billion and its cloud business for another $4 billion.
As for HP, the company continues to turn itself around. Shares are up 60% over the past two years as it too benefits from increased PC and printer demand. When it last reported, HP delivered 9,3% revenue growth with bullish guidance for 2022.
Both HP and Dell have enterprise exposure as well, so if and when people do go back to work, both companies will thrive. Cramer also felt that both companies will see increased earnings this year due to pent-up demand that couldn't be filled last year due to the semiconductor shortage.
Executive Decision: Qualtrics
In his "Executive Decision" segment, Cramer spoke with Ryan Smith and Zig Serafin, founder and CEO, of Qualtrics (XM), the experience management software provider. Qualtrics just delivered earnings that included 48% revenue growth but with inline earnings guidance. Shares of Qualtrics are down 50% from their November highs.
Smith first commented on Qualtrics passing the $1 billion revenue milestone by saying that it was an amazing moment for him as a founder. When you're sitting in your basement, all you want to do is build software that people will love and use, he said, and that's clearly what the company has built.
Turning to revenue growth, Serafin noted that this was the fourth consecutive quarter of accelerated revenue growth, which is a testament to customers building and expanding on the Qualtrics platform. He said they are managing the company for growth, but also remained disciplined in its outlook and forecasts.
Lightning Round
In the Lightning Round, Cramer was bullish on Union Pacific (UNP), Roblox (RBLX), Ulta Beauty (ULTA), and Callon Petroleum (CPE).
Cramer was bearish on ArcBest (ARCB), Jazz Pharmaceuticals JAZZ, Zynga (FFIV) and F5 Networks FFIV.
Do Your Homework
In his "No Huddle Offense" segment, Cramer urged viewers to stop relying on quick, computer-generated headlines and instead, do the homework and listen to the company's conference call.
When Microsoft (MSFT) released its earnings, the initial headlines declared that growth was slowing for their Azure cloud division. Those headlines were dead wrong. When Microsoft CFO Amy Hood got on the company's conference call mere minutes later, investors learned that growth was, in fact, accelerating for Azure.
In after-hours trading, Microsoft shares plunged sharply after the initial headlines emerged. Just a half an hour later, they rebounded and rallied. You simply cannot rely on these hot-take headlines, Cramer said. Do the work and listen to the commentary.
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