Investors should keep their eyes on the prize by picking companies with tangible results and shutting out outside noise, CNBC’s Jim Cramer said Thursday.
“Stay out of the sight of young, money-losing stocks — many of which were never supposed to go public and came too early — and instead, just find solid, tangible companies that make what you like, and then they distribute…heavy dividends.” said the Mad Money host, repeating his 2022 mantra about buying shares in companies that report actual profits and make things happen.
Cramer’s comments came after the market’s third straight day of growth during the week that the Federal Reserve raised interest rates by a quarter of a point. On Thursday, the Dow Jones Industrial Average and S&P 500 rose 1.2%, while the Nasdaq Composite rose 1.3%.
Cramer said the Fed’s interest rate hike, coupled with inflation that has soared for several months, has left the market unforgiving of high-priced stocks.
“Right now, this market has a disease called multiple squeeze. With inflation running rampant and the Fed dragging the economy down, Wall Street is willing to pay less for any company’s future revenue stream,” Cramer said.
“The essence of a market multiple squeeze is that it hits the most valuable stocks the most, which is why I have been warning you since November against stocks with a high price-to-sales ratio.”
Cramer also warned that listening to inappropriate advice, such as divesting individual stocks for index funds, from panic-mongering portfolio managers, would only hurt investors. On Wednesday, the host advised investors to look for companies that are “built to last.”
“The main thing is not to fall for plausible-sounding arguments that actually turn out to be completely wrong,” he said.