It was just last Friday that the Dow plunged over 350 points, prompting Jim Cramer to decide that this market is pure crazy town. But within the craze of the averages, there was one company that reported such an impressive quarter that it managed to skyrocket despite the gravitational pull.
Darden is the parent company of largely known restaurants such as Olive Garden, Longhorn Steakhouse and Capital Grille. The stock roared up to $64 on Wednesday, after closing at $58 just last Thursday.
Can it keep running?
“For years we have known that among the restaurant companies, Darden is one of the most sensitive to the price of gasoline … you would better believe that they are benefiting from that $2 a gallon price,” the “Mad Money” host said.
And while Cramer likes Darden very much, he is not willing to pull the trigger at these prices. He would like it even more on a pullback, especially since it currently trades at 19 times earnings which is a large premium to competitors such as Cheesecake Factory or Cracker Barrel.
“Darden is one of the few companies that seems to be doing everything right at the moment, and I think the stock is headed higher long-term, but ideally you should wait for the next big marketwide pullback,” Cramer said.
Finally, redemption season is over! The hedge funds have raised all of the cash they needed to send back to angry investors and tax loss selling has been taken. That is why the averages were able to roar on Wednesday. But Cramer said to be careful, some stocks won’t be up for long.
To assist investors in selecting the right stocks for their portfolio in 2016, Cramer exposed the offending stocks that he thinks are up artificially right now.
Cramer warned to steer clear of Chinese stocks. Every month there are investors who speculate that China will launch a furious stimulus plan to turn this around.
“I don’t believe any of it. I think the Chinese government is content with the explosion of consumer spending … If this stimulus talk were for real, then China would need to import huge amounts of iron and coal and copper, but that is just not happening,” Cramer said.
So, for those who are buying stocks like Caterpillar, Cummins, Freeport McMoRan and Joy Global — beware that there will only be a couple of days in the new year when you will be able to profit off of the hope fumes.