Synopsis

Jim Cramer said the latest market rotation has created attractive buying opportunities as institutional selling dragged down quality stocks. He highlighted PepsiCo, Starbucks, Constellation Brands, TJX Companies and Johnson & Johnson as potential picks despite recent market weakness.

CNBC’s Jim Cramer on Monday said that investors should not be afraid of the latest rotation in the market, arguing that the move has created chances to buy good companies that have fallen because of institutional selling.

Cramer, a former hedge fund manager and the host of CNBC’s Mad Money, said Monday’s market action was linked to last week’s June jobs report, which showed hiring had slowed from the previous month. That data appeared to push large money managers to adjust their portfolios.

According to Cramer, institutional investors often trade baskets of stocks based on a broader economic theme. When that happens, even strong companies can fall along with weaker names, despite no major change in their business.

“These rotations create dislocations that seem to come out of nowhere. And sometimes those dislocations can give you incredible opportunities to buy high-quality companies at a discount,” Cramer said. “Today we got a bunch of them.”

Cramer pointed to PepsiCo as one such opportunity. He said the recent fall in the stock has given back much of the rally that followed the company’s strong earnings last quarter. With PepsiCo set to report results on July 9, Cramer said the pullback could offer investors a better entry point.

He also highlighted Starbucks, saying investors are finally getting a chance to buy the stock after its recent decline. Cramer said CEO Brian Niccol is still working on the company’s turnaround, and the fall in the stock has made the risk-reward more attractive. Starbucks is also held by Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club.

For investors willing to take more risk, Cramer mentioned Constellation Brands. He said the alcohol company’s latest results showed signs that its beer business may be stabilising, even though concerns remain around its spirits segment.

Cramer was also positive on TJX Companies, another CNBC Investing Club holding. He said a weaker consumer can help off-price retailers as shoppers look for cheaper options. At the same time, excess inventory at traditional retailers gives TJX more discounted products to sell in its stores.

Outside consumer stocks, Cramer said Monday’s market also showed another pattern. Some artificial intelligence-linked winners rebounded, while healthcare stocks that had recently performed well came under pressure.

One of those healthcare names was Johnson & Johnson, also held by the CNBC Investing Club. Cramer said the company has become more focused after spinning off Kenvue, its consumer health business. He also noted that Johnson & Johnson is planning to move away from orthopedics, which could make the company more attractive as a pure-play pharmaceutical business.

Johnson & Johnson is scheduled to report earnings on July 15. Cramer said the recent weakness could give investors a chance to look at the stock before the results.

...moreless

...moreless