On tonight’s MAD MONEY on CNBC, Jim Cramer said emphatically that the huge drop today followed by the monster rally in the same day is a classic bottoming pattern, although he thinks that the move was too quick and he wouldn’t be surprised if we pull back over the next couple of days. When you see the action like this the financial stocks and the retailers that have been the most bettered become the best places to jump in. Here are his play book picks from retail stocks and financial stocks as the sector rotation trades comes into play:
- Cramer went out and said he believes that Citigroup (NYSE: C) has actually bottomed.
- The retail stocks aren’t just bought by short covering trades, and he thinks that is real buying. The companies he speedily announced that he likes are CVS Caremark (NYSE: CVS), Costco Wholesale Corp. (NASDAQ: COST), Guess? (NYSE: GES), and J. Crew Group (NYSE: JCG).
He also wants to pick stocks with no earnings risk that have already pre-announced better earnings:
- IBM (NYSE: IBM) and DuPont (NYSE: DD) are his two picks that are the safest industrials to buy on pullbacks during the bottoming cycle. Both pulled back but they’d both be higher if the market had been normal. he wants to buy these on pullbacks.
Last week Cramer went value fishing for technology companies that he thought were either overlooked during the meltdown or that had been oversold. Here were his picks then:
- EMC Corp (EMC) for its intrinsic value of sub-$5.00 and this is one where we noted that great value manager Whitney Tilson was discussing with "THE EMC STUB" with the explanation for the trade;
- Riverbed Tech (RVBD) for network optimization and he’s been on this stock before;
- ADC Telecom (ADCT) on Wednesday with a $1 down $7 up call that he’s liked for some time;
- Wind River Systems (WIND) for its strong embedded systems orders ahead;
- Microsoft (MSFT) is the one he liked the most for the week after Goldman Sachs added it to the Conviction Buy List (with earnings coming tomorrow).
Jon C. Ogg
January 23, 2008