CNBC’s Jim Cramer reflected on Wednesday’s market performance and told investors to look beyond hot stocks to pay attention to “sleepers.”
“This game is self-correcting. Those who are too hot will eventually cool down, those who are asleep will wake up and it will cost too much,” he said. “Folks, this is a process. If you approach it clinically, the prices of overvalued stocks can and will fall as the underlying companies fail to keep up with Wall Street’s over-the-top expectations. I understand this.”
Major stock averages fell on Wednesday after the U.S. Federal Reserve signaled it was not ready to cut interest rates in the spring. For Mr. Cramer, the Fed’s actions and the resulting drop in stock prices mean investors can now be more decisive about their portfolios.
Cramer said investors got their hopes too high ahead of earnings, and highlighted several hot stocks that posted solid numbers Tuesday night but fell on Wednesday. Despite reporting sales and earnings that beat Wall Street expectations, Alphabet and Microsoft’s stock prices fell, with the former down 7% and the latter more than 2% by close.
Starbucks reported disappointing financial results on Tuesday, but its stock managed to rise on Wednesday. Some analysts suggested Wall Street was bracing for an even worse outcome. For Mr. Kramer, the company’s stock price had “no place to go but up.”
“It would be a mistake to pick a player who hasn’t run much because the Feds aren’t doing anything,” Kramer said. “If you run too hard, even good numbers can slip away.”
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Disclaimer CNBC Investing Club Charitable Trust owns stock in Microsoft, Alphabet, and Starbucks.
