Jim Cramer’s Investing Insights
On Wednesday, Jim Cramer from CNBC shared some thoughts aimed at helping investors approach high-priced stocks with more ease.
“In a hot market… you need the discipline to invest in blue chip stocks to avoid missing opportunities,” he explained on “Mad Money.”
Cramer recalled a lesson he picked up early in his career, where a colleague suggested “dividing stocks by 10” to make high-momentum stocks seem more affordable. For instance, a stock priced at $230 feels like a mere $23, making it psychologically easier to justify buying more.
He posed a question: “Is paying $24 for a $23 stock really going to hurt you?” The simple answer is no.
This advice came as he reflected on the recent surge in stocks associated with artificial intelligence and the demand for data centers. Although he appreciated the early phases of this rally, he didn’t invest in Charitable Trust, the portfolio used by CNBC Investment Club.
Stocks from companies like Micron, Advanced Micro Devices, and Dell Technologies experienced significant price increases as wealthy investors competed to acquire shares. Cramer referred to these as “runaway stocks,” noting the persistent demand and heavy buying that keep pushing prices upward without considerable drops.
A key aspect of Cramer’s investing style is his preference as a “price-sensitive buyer.” He tends to wait for better entry points, a strategy that has been beneficial over the years, though it proves challenging in today’s fast-paced, momentum-driven markets.
“I don’t like buying stocks that keep climbing,” he admitted. “The reason these stocks are rising daily is due to the insatiable appetite of buyers. Unlike me, they’re willing to pay any price.”
However, he clarified that he isn’t completely abandoning his disciplined approach nor suggesting that investors should fill their portfolios solely with momentum stocks. Instead, he proposes a more adaptable strategy that considers this “must-have” attitude for a select few high-conviction stocks, especially in markets where interest rates remain stable.
“If you’re aiming to grab these hot stocks, don’t hold back. As long as the bond market stays stable and diversified, I believe these stocks can keep generating profits,” he concluded.
