Jim Cramer told CNBC on Monday that he is beginning to question the ability of valued stocks to surpass growth counterparts even as Wall Street worries about a more aggressive Federal Reserve.
In particular, the host of “Mad Money” said he was concerned about value-oriented industrial stocks, citing various problems facing their businesses, including supply chains and challenges in labor -related coronavirus.
“If you want a stock that has value here, pick one where we know there aren’t any supply chain, semiconductor or Covid problems. Otherwise, it’s going to be tough without owning some predictable, profitable growth. [stocks]”Cramer said after the second consecutive session of strong success for the technology -heavy Nasdaq Composite.
“Growth selling is over, value selling has begun. That’s my takeaway from today’s action,” Cramer added. However, he admitted there would be some exceptions, pointing to Otis Worldwide after the elevator manufacturer reported earnings on Monday. “But I’m betting that was a rarity,” Cramer said.
Instead, Cramer said this earnings period revealed cracks in the thesis surrounding the industrial values of stocks that were received earnestly in late November. Over the past three months, the iShares S&P 500 Growth ETF (IVW) has dropped nearly 5%, compared to a gain of 0.5% for the iShares S&P 500 Value ETF (IVE).
“One by one, we’ve had big, industrial games like GE, 3M, Boeing and Caterpillar reporting subpar numbers that have questioned us on the legitimacy of the value rally,” Cramer said. “All of these companies are feeling the sting of supply chain problems, inflation, port congestion, and worst of all, Covid.”
That picture is in stark contrast to what some growth -focused technology companies like ServiceNow and Microsoft have reported in recent days, Cramer said. He said those strong quarters – none of the supply chain difficulties that hit the industries – helped Wall Street regain confidence in the growth cohort, especially in light of Netflix’s poor results.
Growth -focused IVW has risen 3.3% over the past five days, while IVE value has risen only 1%.
“How long will this growth rebound rally last? Arguably, as long as value stocks have to deal with supply chain, semiconductor and Covid worries,” Cramer said, adding that growth stocks are benefiting from a dramatic slowdown in the number of new public list.
“I don’t like companies making excuses, even if those excuses make sense. Anything that results in a number reduction is a nightmare; the beat and rise will always come first for me,” he added. .
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