Themes, I always fall back on themes. That’s the best way to approach selloffs. That, of course, and having some cash stored up after a remarkable year-long run, one where the S&P was up 16 and some Nasdaq stocks had insane moves higher.
Look, it’s easy to see what’s up on a day like Monday and say, wow, these stocks are that strong, we have to buy them. There were plenty like that: CVS (CVS) , which rallied on how JPMorgan Chase (JPM) , Berkshire Hathaway (BRK.A) (BRK.B) and Alphabet (GOOGL) quit their attempt to change the healthcare system. CVS, with its Aetna ownership and hammerlock on the vaccine process. I see PVH (PVH) , an old favorite, climbing on a brokerage push. Same with Lululemon (LULU) . I admire the financials for their modest rallies led by former underperformer Goldman Sachs (GS) , on an understanding that financial help, including picking stocks and doing transactions, matter again.
You can never go wrong buying up stocks on a down day. You catch an up day Tuesday and those stocks will be the first to rally because they were stone walls when everything else was crumbling except the redoubtable Tesla (TSLA) with a stock that might go down in the event of nuclear war.
However, I am talking about themes that can stand the test not of today, or tomorrow, but for all of 2021 and beyond. That’s what you have to be thinking about. You need to do that because there are real reasons why stocks are going down and you need to have ideas that get better when they go lower not worse.
What’s driving stocks down?
First, I think there is a fear that President Trump may be hurting his own cause, that the people of Georgia may be so upset with him from recent arm-twisting with Republican election officials that they stay away and Democrats take both Senate spots in Tuesday’s voting. Second, stocks are up so much there are plenty of people who may have waited until the new year to take some profits. Third, I think the President, at this very moment, seems to believe he doesn’t need to leave the White House and, in what should be a losing cause by headcount, many Republicans believe he’s right. And finally, while Operation Warp Speed was swell, the administration of the vaccines can only be considered abominable as the states have no idea what they are doing and vaccine stockpiles continue to grow. At least I am willing to call ’em as I see them. Others must fear presidential tweets. Get over yourself.
So what are the themes that I like and will return to many times this year:
First, e-commerce is growing not shrinking. While I like Amazon (AMZN) and Shopify (SHOP) , I think that this is the year for Walmart (WMT) and Costco (COST) to move to the fore. Walmart’s already well on the way. Costco’s been behind but in 2021 it catches up to everyone as it is now very serious about it and when Costco is very serious about anything it wins. By the way, I don’t care that we may have vaccines soon. Americans have trialed e-commerce and they like it, trust it and believes it represents both convenience and a bargain. Any freight forwarding company will do well, too.
Second theme, a new one: you want to buy travel and leisure stocks on down days because the vaccine, as idiotic as it is being administered right now, won’t always be so. I like Boeing (BA) for world travel, and two new ones, Uber (UBER) for local transit and food delivery and Airbnb (ABNB) , another company that has been sampled by many Americans and now represents a definitive bargain versus hotels post vaccine.
Third: Digitization. Hard to believe that everything hasn’t been digitized but don’t fool yourself, so many companies still think the cloud is like the rain or the sunshine. Others don’t want to take the hit from moving on premise. Nevertheless, they have to. The bargain is too terrific. Again, the bargain is what will drive the enterprise. AMD (AMD) and Nvidia (NVDA) are primary digitization names engaged in takeovers — Xilinx (XLNX) and ARM Holdings — that will make them stronger in 2022. Yes, be that long-term please.
Ah hah, fourth is security. What a terrific thing to buy when stocks are down. I have had them all on Mad Money. CrowdStrike (CRWD) , Okta (OKTA) , Zscaler (ZS) and Palo Alto Networks (PANW) will all protect your cloud information,. NortonLifeLock (NLOK) , a very cheap stock with a good dividend ripe for a takeover, will protect your personal data.
Fifth, 5G remains a hugely important theme because it has barely begun. I think the premier 5G play is Marvell Technology (MRVL) , which had its numbers bumped Monday. Almost all semis are doing something 5G. I think that either Qualcomm (QCOM) and Skyworks (SWKS) can be your placeholder, too. Throw in some internet of things — Texas Instruments (TXN) and NXPI (NXP) — and you will be doing just fine.
Six: stimulus will produce what it did last time, lots of money to Walmart, which as I have noted is still down a lot from its high, Target (TGT) , Home Depot (HD) , Lowe’s (LOW) and the dollar stores, Dollar General (DG) and Dollar Tree (DLTR) . Don’t overthink it; it happened last time, it will happen again as the wealthier will go to the former and the less well off will steer to the latter.
Seven: China. No matter what you hear about how the PRC plays it — where in the world is Jack Ma? — President-Elect Biden will not be as tough on China as the current resident of the White House even if he stays in the White House, which seems to be his hell-or-high water intention. That means the Chinese will extend a thorn branch of buying Boeing planes — there we go again — as well as Caterpillar (CAT) and 3M (MMM) equipment. Nothing’s a no brainer but I think that even President Xi, a modern day Mao, wants some 737 MAX’s and 787s to show he prefers Biden to Trump. Boeing employs directly and indirectly two million people. Lotta voters. Mastercard (MA) , Visa (V) and American Express (AXP) can work, too, all of which dovetail with the travel and leisure theme just mentioned.
Eight: new theme: individual stock selection and wealthy management. That means Goldman Sachs, Morgan Stanley (MS) and, yes, Robinhood will all be viewed as places to run to in this new, non-index world.
Nine: Work from anywhere is going to be the new norm. It’s just too inexpensive and healthy to do so. That’s not changing. I think that the companies that help do that, Zoom (ZM) , Salesforce (CRM) once it closes on the Slack (WORK) deal, Microsoft (MSFT) , as well as Dell (DELL) , HP (HPQ) and Apple (AAPL) are all winners. You know me, I stand by Apple as always: own it, don’t trade it.
Finally, ten, healthcare. You may not believe it but healthcare will be great under the Dems. The Affordable Care Act is here to stay. Again I like CVS as well as Humana (HUM) , UnitedHealth (UNH) and Johnson & Johnson (JNJ) , the latter being the best positioned for both earnings-weak dollar-new products and the vaccine when they finally get it done.
There are plenty of other one-off ideas I continue to like. I think Facebook’s (FB) cheap versus the growth numbers. I like AbbVie (ABBV) and Dow (DOW) for their dividends. Penn National (PENN) for gambling.
But it’s the themes that work the best. You can buy them today, buy them tomorrow if they are down and I swear all of these are cheaper when they go lower.
(CVS, JPM, GOOGL, GS, AMZN, WMT, COST, BA, AMD, NVDA, NLOK, MRVL, MA, CRM, AAPL, FB, MSFT and ABBV are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
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