The S&P 500 is down 10% over the past month alone.
According to CNBC’s Jim Cramer, the recent plunge in stocks reflects a lack of investor confidence in the Federal Reserve. He says these investors believe that the Fed has lost control or is helpless to fix things given the state of the global supply chain.
But Cramer remains bullish — particularly on Fed Chairman Jerome Powell. “I think the consumer is strong. Jobs are plentiful,” he says. “Leaving the market is a mistake because Powell happens to be an incredibly thoughtful, good public servant who’s doing amazing.”
For bullish investors who share that sentiment, here are a few Cramer’s top recommendations.
Chip giant AMD is starting to look like the baby that gets tossed out with the bathwater. The shares are down more than 40% in 2022 despite boasting a thriving underlying business.
In Q1, AMD’s revenue was up 71% year over year to $5.9 billion.
Some of that topline growth was driven by the acquisition of semiconductor company Xilinx. Eliminating the impact of that purchase still gives us top-line growth of 55%. That’s excellent for a stock that’s currently trading at a forward price-to-earnings ratio in the high-teens.
Nvidia is another chipmaker in Cramer’s “good basket.” While the stock has also plunged by more than 40% year to date, Nvidia’s outlook remains relatively bright.
Nvidia is scheduled to report Q1 earnings later this month. Given the recent rout in the digital assets market, the report will likely reflect a plunge in crypto mining demand. But analysts still expect $8.09 billion in revenue and $1.29 in earnings per share.
Nvidia could be an ideal target for investors looking for growth at reasonable prices.
Picking the right stocks in a choppy market is difficult — particularly in the volatile tech sector. Instead of stock picking, investors can make a broad bet on the entire beaten-down space.
The Vanguard Information Technology ETF (VGT), for instance, offers exposure to the leading names in technology. The fund’s biggest holdings include Apple (APPL), Microsoft (MSFT) and Adobe (ADBE).
VGT is down 23% in 2022.
Cramer believes a rising interest rate environment is good for big banks. “They’re gonna make a lot more money off you,” he says.
When rates increase, the spread between what banks charge in interest (to borrowers) and what they pay out (to savers) widens.
Blue-chip bank stocks are a great option. But investors can also bet on the entire sector through an ETF. The SPDR S&P Bank ETF (KBE) tracks the total return performance of the S&P Banks Select Industry Index — an index with an average price-to-book of 1.1.
The ETF’s top holdings include banks like First Bancorp (FNLC), Northern Trust (NTRS) and M&T Bank (MTB). Investors worried about rising rates and inflated valuations in the tech sector might want to put KBE on their watch list.
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