What works? Jim Cramer says to invest in companies that make things, at a profit, and return some of those profits to shareholders while maintaining a reasonable share price for its growth rate.
You can save yourself a lot of headaches by sticking with what works, Jim Cramer told his Mad Money viewers Wednesday. That means only investing in companies that make things, at a profit, and return some of those profits to shareholders, while maintaining a reasonable share price for its growth rate. Those criteria may seem daunting, but they’re not a restrictive as you might think, and they’re the only thing that’s working.
Not company that doesn’t fit that bill is Netflix (NFLX) – Get Netflix, Inc. Report, which saw its shares crater, down 35% in a single day, after the streaming service reported a stunningly bad quarter. For years, Wall Street chose to ignore Netflix’s earnings because the company had subscriber growth. Without that growth, however, investors struggled to put a value on the stock.
The plunge in Netflix took down shares of Walt Disney Co. (DIS) – Get Walt Disney Company Report, sending them lower by 5.5%. But Disney isn’t Netflix, as they have movies, theme parks, cruise lines and ESPN, all of which can offset any streaming service losses at Disney+. Cramer said he’d buy more Disney as the stock declines.
We also heard from two other companies that fit the new bull market model, Procter & Gamble (PG) – Get Procter & Gamble Company Report and Johnson & Johnson (JNJ) – Get Johnson & Johnson Report. Both of these companies are struggling with rising costs, but they have the brand power to raise prices. Both companies are also committed to shareholders with buybacks and dividends.
Cramer also gave a nod to Morgan Stanley (MS) – Get Morgan Stanley Report, another company with solid earnings and at 3% dividend and stock buyback to reward shareholders.
Finally, there’s Tesla (TSLA) – Get Tesla Inc Report, which is the exception to the rule. Tesla shares aren’t cheap, nor does the company offer a dividend, but the company’s growth and success cannot be denied.
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