Investors who “like Jim Cramer” think the Federal Reserve could hike interest rates next week should expect the stock market to get slammed.
“The thing about sell-offs is that the best stocks tend to go down the hardest. But, and this is a big but, they are also the first to come roaring back,” the “Mad Money” host said.
To prepare investors, Cramer revealed his list of stocks to buy ahead of the Fed meeting. He chose these plays based on their ability to rebound after a rate hike. He noted that they are likely to bounce back the best because what prompted their success had nothing to do with the Fed. All of the plays are secular growth stories and have defied naysayers.
Cramer selected the winners by looking at a list of the best-performing stocks in the S&P 500, Nasdaq and IPOs. Then, he removed players that were on the list due to takeovers, pure commodity stocks that rose because they were down so much going into the year and gold stocks that depend on low rates.
That left Cramer with three categories of stocks: Semiconductors connected to the internet of things and Apple, value stocks that did better than investors thought and companies that built a better mousetrap.
“The assault on stocks I’m expecting in the near future is all about the Federal Reserve raising interest rates.”
No. 1 The hottest play on Cramer’s list was NVIDIA, because it participates in both the internet of things and gaming chips. He also believes it has significant momentum.
“This one has the most momentum of any stock in the Nasdaq and the S&P 500,” Cramer said.
No. 2 Cramer also sees potential for semiconductor equipment plays such as Lam Research and Applied Materials. Cramer noted that Applied Materials has enjoyed the most upside surprises in a row of any stock on his list.
No. 3 Cramer touted the retail suppliers with lean inventory going into back to school season. Namely, PVH Corp could be a big winner because it reaps the benefits of a European comeback and could stand out in a non-promotional environment, Cramer said.
No. 4 Urban Outfitters scored big with fashion, even though it’s a brick-and-mortar company. It struggled for ages and has finally made a comeback, so Cramer expects a Fed rate hike will not stop it.
No. 5 Microchip Technology is another basic building-block semiconductor name. Cramer viewed it as a great way to play both the internet of things and potential takeovers in the sector.
“We know the consolidation is rife here, and you can win either way,” he said.
No. 6 Symantec gained strength when it shelled out $4.65 billion to buy Blue Coat and then adopted its CEO Greg Clark to take over. The stock has not looked back since then and Cramer suspects it will be a natural bounce back candidate.
No. 7 Cramer saw Edwards Lifesciences as a “better mousetrap” company because of its heart replacement device.
No. 8 Intuitive Surgical is also a “better mousetrap” player. It has both a strong product with its surgical robot and a solid business model that Cramer thinks could defy critics and put up better-than-expected numbers.
No. 10 The last on the list was Micron, which has had some success lately with its flash business.
Bonus IPO plays: Twilio and Acacia Communications. Cramer found that Twilio has some of the best clients on Earth, and they can’t live without it, which is what makes it so important. Acacia is expensive, but has great momentum. That is exactly what Cramer looks for during a Fed induced sell-off.
“I have waited for a supremely up day to tell you what I think could happen when, not if, but when we get the next sell-off, especially if the Fed gives us a rate increase next week,” Cramer said.
When that happens, investors will finally have a chance to buy Cramer’s list at better prices.
“Knowing this pattern, the more nimble among you might want to trim some of these positions.The others? Just stay the course. I doubt you will be able to get out and get back in again in time to participate in the next move higher once the smoke clears,” Cramer said