So you want to invest like Jim Cramer, huh? It’s actually not as hard as it seems — and I don’t mean that as any kind of slight. Cramer is an accomplished investor, hedge fund manager and market commentator. And has selected plenty of solid stocks to buy.
Cramer generated a massive return at his fund, returning 24% annually over 14 years after all fees.
While we can’t replicate his hedge fund strategies, we can replicate his strategy regarding his favorite stocks. Generally, Cramer avoids obnoxiously valued stocks and he loves to get bullish on stocks that have a great business with solid margins. The man also loves himself a good dividend and like the rest of us, loves when there is long-term secular growth involved.
So, without further ado, let’s look at seven stocks to buy like Jim Cramer.
- Apple (NASDAQ:AAPL)
- Honeywell (NYSE:HON)
- Bristol-Myers Squibb (NYSE:BMY)
- Nvidia (NASDAQ:NVDA)
- Costco Wholesale (NASDAQ:COST)
- Salesforce (NYSE:CRM)
- Ford (NYSE:F)
Now, let’s dive in and take a closer look at each one.
Stocks to Buy Like Cramer: Apple (AAPL)
In 2013, Cramer coined the acronym “FANG,” however, it did not include Apple. Instead, the “A” stood for Amazon (NASDAQ:AMZN). In any regard, most will now consider FANG as “FAANG,” as Apple has been a juggernaut over the years. At the time, it did not sport the growth rates that the others in the group did, but that hasn’t spoiled its returns.
Apple now sports a nearly $2.5 trillion market capitalization and has climbed 1,000% over the last decade.
Critics will question how much growth could really be in iPads, iPhones and Macs. It turns out, quite a bit. But the company’s other products — like AirPods and the Apple Watch — have become incredibly successful.
Overall, all of its products help fuel its crown jewel: Services.
The company’s Services unit has strong double-digit revenue growth and recently eclipsed $50 billion in fiscal year-to-date revenue, as Apple is three-quarters of the way through its fiscal year. With profit margins that are about double its Products business, this has really moved the needle for the company.
Cramer has loved this name for years and eventually adopted the mantra of, “Own Apple, don’t trade it.”
Cramer loves diversification, so a portfolio stuffed full of one sector isn’t going to cut it for him — even if the companies are great. He always believed in having multiple sectors in a portfolio and that includes an industrial.
Cramer has been a long-time fan of Honeywell, and why shouldn’t he?
Shares are up more than 100% in the last five years and 430% over the last 10 years. That’s not as good as Apple, but it’s pretty impressive. The stock also hit an all-time high in August and pays out a pretty consistent dividend.
Cramer was a big fan of CEO Dave Cote, who was at the helm from 2002 to 2017, but clearly CEO Darius Adamczyk has done a good job. He joined the company in 2008, so it’s not as if he didn’t have a thorough understanding of the business.
With estimates calling for roughly 7.5% revenue growth in each of the next two years and more than 14% earnings growth in each of the next two years, Honeywell should continue to perform well.
Stocks to Buy Like Cramer: Bristol-Myers Squibb (BMY)
Anyone who has watched Cramer or listened to CNBC over the years knows his famous pronunciation of Bristol-Myers — “Bristol MYYYYYERS!”
Bristol-Myers was the quintessential value play. It had a low valuation, high dividend yield, strong cash flows and great products. When Celgene went through a series of unfortunate events, Bristol-Myers didn’t waste time making the mega acquisition. It gave a much-needed boost to the company’s growth and like Bristol, Celgene’s valuation was incredibly low.
Bristol-Myers Squibb recently hit multi-year highs, but has recently embarked on a painful 10% correction. Amid the current slide, the stock has fallen in 16 of the last 20 sessions through Sept. 15.
That said, shares trade at just 7.7 times this year’s earnings, which are forecast to grow more than 16%. Next year, estimates call for almost 10% growth, all while the stock pays out a 3.1% dividend yield.
Cramer loves good management teams. Very few executives have been as good as Nvidia founder and CEO Jensen Huang as of late. His company’s value has exploded over the last several years as it commands best-in-class margins, with strong revenue and earnings growth.
Cramer has been a long-time fan of Nvidia, and so have I. However, while the stock is up huge over the last few years, the ride hasn’t always been smooth. In the fourth quarter 2018, the stock was obliterated due to a fallout in cryptocurrency demand.
In Q4 2018, shares of our beloved Nvidia fell more than 57% from peak to trough. Before that decline, Cramer “rang the register” on Nvidia, going from bullish to flat on what seemed like an overnight change of mind. He made that decision based on commentary from Advanced Micro Devices’ (NASDAQ:AMD) management team a few weeks earlier regarding crypto and it proved to be a brilliant call.
Cramer couldn’t avoid Nvidia forever, though. The business was simply too impressive to ignore. He even called his dog Nvidia! That’s some dedication.
Stocks to Buy Like Cramer: Costco Wholesale (COST)
More recently, Cramer coined the acronym “WATCH,” which was for a handful of retail stocks. The “C” in that acronym stood for Costco. Critics of the stock will always cite its high valuation. That’s fine. For as long as I can remember, Costco stock has traded with a premium. Just look how that has paid off, with the stock up almost 500% in the last decade and 1,250% in the last 20 years.
Cramer’s point with Costco has always been simple. The company generates an immense amount of its profit (not its sales) from its membership sales, since it’s basically a full-margin form of cash flow. In turn, this helps the company pass on incredible value to its customers.
Collectively, it’s a win-win situation. Costco generates billions in profit, while customers save a boatload of money.
Analysts expect 22% earnings growth this year and another 22% next year. While that’s great, investors may want to keep this one on their radar for a pullback. Shares are up about 20% since breaking out in late June and are up nearly 50% since bottoming in March.
For anyone who watches Cramer’s “Mad Money” show, they’ve likely run into an interview between him and Salesforce CEO Marc Benioff.
Cramer has loved Benioff and over the years, he has continued to champion Salesforce stock. Like Amazon, this name has faced plenty of bearish arguments, mostly related to its valuation. Despite its lofty valuation, Salesforce has been a robust performer. Up almost 750% over the last decade, Benioff & Co. have continued to deliver on their promise for growth.
The company’s recent acquisition of Slack should help grow its revenue, while recent investments have moved the needle too. That includes investments in Snowflake (NYSE:SNOW) and Zoom Video (NASDAQ:ZM), along with plenty of others. In fact, the company made more than $2 billion in 2020 thanks to its investments.
While the valuation has fallen over the years, Salesforce keeps on delivering. In its most recent earnings report, the company beat on earnings and revenue expectations, and raised its full-year outlook.
Analysts also expect Salesforce to grow its revenue by 18% or more in each of the next three years.
Stocks to Buy Like Cramer: Ford (F)
Last but not least, Cramer has been all jazzed up about electric vehicles over the last few years. He’s been a big proponent of Tesla (NASDAQ:TSLA), but that stock is all over the place. Its valuation is high and it can be hard to sit through the volatility.
Instead, Cramer has been pounding the table on what many investors consider a safer pick with Ford. Tesla may be superior to Ford in several avenues, but with a $750 billion market cap to Ford’s $50 billion market cap, it’s quite a stark difference.
Ford’s electrification efforts have come a long way and its push for the electric F-150 may be a huge opportunity for the company. If it can capitalize on this opportunity, perhaps the market will reward it with a higher valuation like it’s been willing to give to Tesla, Nio (NYSE:NIO) and countless special purpose acquisition companies (SPACs).
On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.