Important points
CNBC’s Jim Cramer said Monday he’s wary of investors rushing into the market’s hottest trades, arguing that chasing “parabolic” moves often leads to painful losses and that better opportunities may lie in overlooked stocks. “They’re all too hot, too hot, for me,” the host of “Mad Money” said, referring to the names of hot technologies and semiconductors related to the AI boom. “When you buy stocks that are going parabolic, they tend to get hammered.”Rather than following the crowd and investing in stocks like SanDisk, Intel and Advanced Micro Devices, Kramer said he’s taken the opposite approach by buying blue-chip companies that have fallen out of favor. That’s why his charitable trust, a portfolio used by the CNBC Investment Club, recently bought Johnson & Johnson stock, despite the “terrible performance” of health care stocks. In fact, the healthcare sector is the worst performing sector in the S&P 500 this year. “We buy in free fall,” Kramer said of J&J. “It’s not often that you get the best stuff at a discount. When it happens, we buy a certain amount.” He described Johnson & Johnson as “the best, or at least second best, pharmaceutical stock after Eli Lilly,” and emphasized that the company’s fundamentals remain strong despite negative sentiment weighing on the sector. The club has owned Lilly for many years. Kramer said much of the recent decline in J&J stock has been driven by “noise,” including concerns related to the talc lawsuit, overshadowing important developments such as new drug approvals and strategic business changes. For Kramer, the gains go beyond a single stock. He said investors should resist the urge to chase momentum and instead think more carefully about portfolio construction. “Your portfolio should always have a good mix of what’s popular and what’s not,” he said. This balance is especially important in markets led by a narrow group of winners. He argued that the same leader can quickly lose support if sentiment changes, whether due to changes in spending, ratings or broader macro conditions. “If you have all the technology and something fails…you’ll still have some winners in your portfolio,” Cramer said, emphasizing the value of owning unpopular stocks alongside the market’s biggest winners. “What Goldman Sachs taught me is that not everything goes up at once. I always say that, something is going to go up.” Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
