In this article, we will look at the stocks Jim Cramer reviewed on Mad Money while discussing the recent market rotation. The host of CNBC’s Mad Money said Wednesday that the market is in the middle of a rapid and somewhat chaotic rotation phase.
History says this explosive phase of this move is likely behind us… The move is over, people, but there’s good news. While the easy money has definitely been made, we have to be grateful that history says we aren’t about to crash or go into some sort of multi-day tailspin. We’re just working off the overbought gently, in just a benign fashion… Usually, when the oscillator gets this high, we tend to have brutal rotations and end up sending some stock up violently while others go down altogether… I don’t think it’s going to be violent. I think it’s going to be exciting.
READ ALSO: What You Missed on Mad Money: 17 Stocks Reviewed by Jim Cramer and Jim Cramer Looked at 17 Stocks, Including Microsoft, CrowdStrike, and Salesforce.
Cramer said that it is difficult to interpret these rotations. He added that there is often no clear explanation for why certain stocks rise during these stretches. He said that after a strong rally, investors are often bombarded with conflicting narratives. Some voices will push the idea of buying beaten-down names that may not deserve a comeback, while others will say that the entire move was driven by short covering. He also said there might be claims that the gains are set to unwind completely.
But the main thing you need to know is that the rotations can be random, and they can be frustrating. You have my blessing to trim stocks that have run too much, as we’ve done for the Charitable Trust. But no matter what, the bottom line is, some crazy rotations are about to occur. I wouldn’t be surprised if next, it’s the drugs then it’s the retailers, then it’s the healthcares. This is no man’s land, and I love it.
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on April 15. We listed the stocks in the order that Cramer mentioned them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
Jim Cramer’s 11 Stocks Review: HOOD, WFC, and Market Rotation
11. Wells Fargo & Company (NYSE:WFC)
Wells Fargo & Company (NYSE:WFC) was among the stocks Jim Cramer reviewed on Mad Money while discussing the recent market rotation. Cramer mentioned the stock while discussing the valuation of bank stocks. He stated:
I am getting tired of hearing that this market’s too expensive. Anyone who feels that way should take a hard look at the big banks now that they’ve all reported because they sure don’t seem very expensive to me… I would tell you their stocks are so darn cheap versus the entire market that we have to think about owning one. If something good happens, the banks will all take off because they’re so darn cheap. What do I mean by cheap? Okay, I’m talking about an apples-to-apples comparison versus the price-to-earnings multiple of the S&P 500. Yes, you can figure out the PE multiple of the S&P by taking the earnings per share estimates of all the companies in the index collectively and then giving them the same weightings that the stocks get.
When you look at these comparisons, they are, for lack of a better word, insane. The S&P 500 trades at nearly 22 times this year’s earnings estimates. The expected earnings growth rate of the S&P is 17%… Now, let’s consider the banks on this apples-to-apples basis. Citigroup is expected to see 52% earnings growth this year. It sells at 12.4 times this year’s earnings per share estimates. Goldman Sachs is expected to grow by 14.9%. It trades at 15 times earnings. Bank of America is expected to grow by 14.2%. It sells for 12.5 times earnings.
Morgan Stanley’s expected to see 11.7% earnings per share growth. It sells for less than 17 times earnings. Wells Fargo, look, it had a not-so-hot quarter, but it’s still expected to grow by 11.7%, and it trades at 11.5 times earnings. JPMorgan’s expected to grow at 9.7%, and it’s got a PE multiple of 13.9. Or in other words, with these bank stocks, you have companies that are growing a tad slower than the average stock of the S&P, but in terms of valuation, they sell at a dramatic discount to the S&P as a whole, huge discount… Right now, though, they have the lowest price-to-earnings multiples in part because they’re considered to be brimming with weak private credit exposure. But for the most part, that’s not true either. Even Wells Fargo did their best to say it. Although they had a lot of private equity, only a small part was the hated software category.
Wells Fargo & Company (NYSE:WFC) provides financial services, including banking, lending, investment, and wealth management solutions.
10. Nokia Oyj (NYSE:NOK)
Nokia Oyj (NYSE:NOK) was among the stocks Jim Cramer reviewed on Mad Money while discussing the recent market rotation. Toward the end of the lightning round, a caller asked: “What the heck is going on with Nokia?” In response, Cramer said:
First of all, what Kitty has done here is make a lot of money. Now, there are a lot of people going to play on different predictions stuff and do all sorts of silly things. The fact is, Kitty looked at the situation, she decided she liked Nokia, she bought it. And Kitty, hold on to it, you got another 30% going on there.
Nokia Oyj (NYSE:NOK) develops mobile, fixed, and cloud network solutions, including 5G, optical, and IP network technologies. A caller asked about the stock during the January 5 episode, and Cramer responded:
Oh, Nokia is tough… Nokia is very tough. And I’ll tell you why Nokia is tough because it’s up against Apple. It’s up against a lot of different great companies. Hey, by the way, Apple was down badly today. I have to tell you, I think this is a pretty good level to buy some Apple, down four bucks. I think, buy a little Apple and then it comes down a little more, buy some more.
