Monthly Meeting Q&A with Jim Cramer: Everything from energy to Costco to embracing sell-offs

Published Fri, Mar 29 20241:00 PM EDT

During the March Monthly Meeting on Wednesday, we took questions directly from Investing Club members. Here are the responses from Jim Cramer and Director of Portfolio Analysis Jeff Marks. Their answers have been adapted for length and clarity. 1. Is Coterra Energy positioned to take advantage of the perceived need to increase power to accommodate the growth in data centers? (Vincent, New York) Jeff Marks: Due to the elevated power needs data centers require, energy demands will be higher. But, at the end of the day, oil and natural gas are commodities, so their prices will be a function of supply and demand. We like Coterra for its flexibility to shift investments to either oil or natural gas – whatever makes the most economic sense. But the best play in the portfolio on the growth in data centers is Eaton . Jim Cramer: We have a national market in natural gas. But Coterra doesn't make as much money on natural gas right now. It's down to $1.70. If we can get certain countries to adopt natural gas – such as China, which too many people working in the coal business – then you would see a spike in nat gas prices. 2. Is it unwise to own two stocks in the same industry? I've had Palo Alto Networks for 18 months and am considering adding CrowdStrike . (Steve, Michigan) Jim Cramer: I don't blame you for switching to CrowdStrike from Palo Alto, but I had Palo Alto CEO Nikesh Arora on last week. He's indicating that because of a tremendous hack that's going on with health care plus a government hack, he's being called in on these. Now, CrowdStrike versus Palo Alto, there's no reason to own both. I do think after speaking with Nikesh that I am very tempted when this breaks $280 to buy some Palo Alto. Jeff Marks: If the two companies are in a mature industry that's maybe not growing, where companies are just fighting for market share against each other, then it really doesn't make a ton of sense. Think beverages like PepsiCo and Coca-Cola . Do you really need to own both both? However, if the companies operate faster-growing markets then it can make some sense. We've owned multiple chip companies at times such as Nvidia and AMD . So, sometimes there are cases. But not always. 3. After quite a few significant market drops since 2020, I'm "scared" another one is coming. Some experts say as much as a 10% correction. This makes me want to sell at least some of my investments. Is there a way to hedge a big correction? (Gwen) Jeff Marks: For the Club, we can't short stocks or trade options so our only "hedge" would be to raise cash. But keep in mind that pullbacks are very common in the market. One of 10% happens every two years or so. And 5% declines in the market historically happen four to five times per year – though I know we haven't had one in a while. I don't know what your investment horizon is or risk tolerance, but don't necessarily be afraid of a market correction. Instead, look at those sell-offs as great buying opportunities in high-quality companies that have finally come in at a discount. Trying to trade in and out means you need to be right twice: the exit point and the re-entry point, which is very difficult to do. Jim Cramer: By trying to miss dips, you have historically underperform terribly, with exception of 2008, which we advised for this product to get out and dodged a 40% decline. The great Peter Lynch, who ran the Magellan Fund, always loved sell-offs because he said, "How do you have a garden without rain?" I always loved that. 4. I joined the Club recently and missed some earlier moves in Wells Fargo . I understand that the removal of the asset cap might occur in 2025 and create more upside. Should I sit out for now? (Jim, Arizona) Jim Cramer: No because this is one that does better in the "higher for longer" interest rate scenario and because CEO Charlie Scharf is just beginning his fifth year turning around the company. Because I think this quarter will be excellent, I would buy some now and buy some later. Jeff Marks: The stock has been a great performer. JPMorgan is doing fantastic, but I think Wells Fargo, in terms of how the stock has been, deserves to be in the same breath. 5. In the past, you have mentioned not buying shares in a company that's above your average cost basis point. Is there ever a time where it's ok to do it? (Nick) Jeff Marks: Yes, of course, there are times. Think about Broadcom . We were buying it in the $800s . It was a very different company back then. Think about what's happened since then. They closed the VMWare deal that wasn't approved yet when we were buying it. They picked up a third AI customer for their custom AI chips. Many believe that's TikTok, while Meta and Alphabet are the other two customers. So, it's a much different company now than it was back at that cost basis. Unless there's a big sell-off in the market, I don't expect it to sell back down there. If you're looking at a pullback in Broadcom of 10% from the high, that gets intriguing to me. So, I think that would be an example of when it would be OK to violate basis: when the company is much different at its current price than it was when you started buying. Jim Cramer: We did add Broadcom above our basis. I'm tempted to go above our basis again on Broadcom if this thing goes to $1,280. I know it's got to go lower. 6. I have a small position in Costco and I haven't added more to the position, as it has risen so quickly. I'm looking to get back in at about $720....does that make sense? Or is it too late to invest and would be chasing it? (Elizabeth, Pennsylvania) Jim Cramer: No, you buy it. Rich Galanti, the fabulous CFO, just retired. We have a new CEO, too. I'm trying to get out to see them. This is a great level to start. They already gave you the special dividend , but they haven't done the membership fee boost yet. I would buy some here and then I'd wait if it goes under $700, I'd buy more. Great level. Jeff Marks: Usually if you lose your CEO and CFO, maybe that's a cause for concern, but the culture there is so strong. Some of membership fee hike will flow to the bottom line, but they'll also use that extra money to keep their prices down, which ultimately allows them to take even more market share from their competitors. It's a volume company, not a margin company, so if they can turn more volume and take share from their competitors, that's the flywheel of the business. 7. Due to antitrust lawsuit against Apple , has your "own it, don't trade it" belief changed? Do we just hang on and ride this out? (Linda, Ohio) Jeff Marks: No, nothing has changed. These lawsuits could take many, many years to play out. I think people are already focusing back to the fundamentals. Maybe it's weak sales in China right now, but I would point your attention to the fact the company said this week its annual Worldwide Developers conference will start June 10. It's widely expected we'll hear more about generative AI being incorporated into iPhones at that event. Jim Cramer: Apple will file a motion to dismiss in May. ... They have a loser case. I'm not concerned. 8. What sectors or individual stocks should we invest in to take advantage of the eventual Fed rate cut? (Steve, Mississippi) Jim Cramer: It's housing. Housing is already up so it's real dangerous to continue to fuel that. And it's autos because the price of your loan would go down. That's why we want Ford and it's why we keep Stanley Black and Decker . Jeff Marks: I think Best Buy is another one, too, because if you buy a new house, you're going to fill it with TVs and other appliances . Plus, the yield story, as well. Morgan Stanley will be a beneficiary on two fronts: Reopening the IPO window and also there's been some cash sorting headwinds in the wealth management business. Danaher also benefits from biotechnology companies having easier access to capital. A lot of different ways to win here. 9. Why hang on to Starbucks ? (Sam) Jeff Marks: The stock has been very disappointing, but down here at around $90 apiece, it does seem to have hit a floor. A lot of that has to do with valuation. We've talked before that it trades at a trough multiple relative to its history. I think in the upcoming quarter it's fair to expect another cut. The question is how the stock will react to that cut? Last time, the stock didn't go down on the cut. It has drifted a little bit lower since then, but that's because the business trends haven't improved yet. We need to see China get better, and we need to see the afternoon U.S. business get better. The Middle East has also been challenging. Jim Cramer: The numbers are no good here right now. The new CEO, Laxman Narasimhan, is doing a good job, but you're fighting China and you're fighting the United States, and they absolutely are not going to be able to turn around both this quarter. But it does yield 2.5%, which is rather extraordinary. I'm concerned. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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