CNBC’s Jim Cramer on Tuesday outlined a simple framework for understanding the current market as the disruptive threat posed by artificial intelligence looms over industries ranging from software to commercial real estate.
“We want companies that make and do things that we understand. We want to avoid things that we don’t understand or can’t understand. Because if we don’t understand, it’s probably the kind of stock that Anthropic … can destroy with a simple press release,” Kramer said on “Mad Money,” referring to the AI startup that developed the Claude chatbot. Anthropic has been announcing new industry-specific AI tool announcements in recent weeks, often accompanied by drops in stocks in those areas.
“Companies that were once impregnable with big moats suddenly seem like they’re worth nothing — well, nothing,” Kramer said. “Maybe these software stocks can go up in value on a regular basis, but if you don’t know what they do, what they’re making, and you can’t explain the business to others, you can’t own it.”
Cramer’s comments Tuesday came after a day of recovery on Wall Street, where all three major U.S. indexes ended the day higher. As the concept of “HALO” stocks, which have more assets and less obsolescence, gains increased attention, Kramer said he is trying to further pinpoint what this fragile market is looking for when identifying winners.
He said another important consideration is whether there is a demand for the company’s products, which is especially helpful if the product is facing a shortage. This is currently the case for companies that make memory chips and storage devices used in AI computing. sandisk and micron.
“What about Caterpillar? We like their products,” Cramer added, also referring to fellow gas turbine manufacturers. GE Vernovathis is a portfolio owned by his charitable trust and used by the CNBC Investment Club.
“What about things that move other things? FedEx is good,” Kramer said. He also ticked off a list of value-oriented retailers including: walmart, dollar general, costco, dollar tree and TJXI will report tomorrow. “All of those companies make and sell things cheaper than other companies.”
Mr. Kramer mentioned the following: johnson & johnson, colgate, procter and gamble and hershey. “Don’t think about HALO. Think about what you can understand,” he said.
Market areas that Kramer said he would be cautious about include financials, any sector that depends on beef prices retreating from record highs, and steel makers that could be hurt by lower tariffs.
Disclosure: Cramer’s Charitable Trust, a portfolio used by CNBC Investment Club, owns stock in TJX, COST, and PG.
