CNBC’s Jim Cramer on Wednesday explained to investors how to start looking for stocks in the current market.
“When you’re looking for stocks to own, you need a worldview,” the “Mad Money” host said. “That means looking at the economy and interest rates first. You have to start there, because those are essential.”
On Wednesday, S&P500 The loss was less than 0.1%, but Dow Jones Industrial Average decreased by 0.2%, Nasdaq It decreased by about 0.1%. Cramer said that even though consumer spending rose a slightly higher-than-expected 3.7% in July from a year earlier, the overall economy remains relatively stable and inflation could approach a peak, especially if oil prices continue to fall. He said that outlook is the starting point for deciding which sectors and ultimately which stocks you want to own.
Kramer usually focuses on the technology sector, but said political opposition to data center development and other uncertainties complicate the sector. He noted that while travel and leisure could benefit from cheaper fuel, these businesses rely heavily on discretionary spending, making them less attractive as inflation-weary consumers prioritize value and look for ways to save money.
That led Mr. Cramer to look for companies that could benefit from falling oil prices while offering downside protection through large dividends. pepsico got his attention.
“Eureka, it’s a perfect fit,” Kramer said.
PepsiCo has a dividend yield of about 4% and trades at a 2027 P/E ratio of about 16 times, a valuation that Cramer believes is attractive. He also pointed to CEO Ramon Laguarta’s repeated statements that soaring gasoline prices are weighing on sales, suggesting that lower fuel costs could be a major tailwind.
Still, Kramer emphasized that finding stocks that align with his macro theory is just the beginning of the investment process.
“It’s the origin of an idea. It’s not a position,” he said. “We explained the starting point of the process…Once you have an idea, you have to do your homework. Study the company for years, look at the raw materials, see what management has to do, and decide if they’re going to do it.”
“This is where a potential acquisition with PepsiCo begins,” Kramer said. “For me, the question is, can I put this in the bullpen of a charitable trust? And you know what? If you want to know the answer, you need to join the investment club.”
