Jim Cramer says liking a company is only a starting point. Investors must also look at fundamentals.
The hatred for this market knows no bounds, Jim Cramer told his Mad Money viewers Wednesday. That hatred is certainly justified, given how many stocks have taken huge losses over the past few months. But that doesn’t mean that investors aren’t also to blame for the carnage in their portfolios.
Many investors follow the strategy of buying what they know. They like a company, so they buy shares in that company. But Cramer noted that liking a company is only a starting point. Investors must also look at fundamentals. Are they making money? Do they have enough money to weather rising interest rates and a possible recession? Do they have too much competition that will make a recession unbearable?
Great companies don’t always make great investments. That’s why stocks like AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report have fallen from $62 last fall to just $12 a share Wednesday. It’s why GoodRx (GDRX) – Get GoodRx Holdings, Inc. Class A Report plunged from $47 to $7 and Teladoc Health (TDOC) – Get Teladoc Health, Inc. Report is down from $154 to just $32.
Stocks like Carvana (CVNA) – Get Carvana Co. Class A Report made sense at $370 last August when the auto market was red hot, but with rates rising and sales cooling, today’s $26 share price is a lot more realistic.
Now is not the time to give up on stocks as an asset class, however. Cramer said investors just need to educate themselves better on what happens to companies at this point in the economic cycle. EVgo (EVGO) – Get EVgo, Inc. Class A Report and Roblox (RBLX) – Get Roblox Corp. Class A Report were great last year, but that doesn’t mean they’ll be great again this year.
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