US Stocks, War-Bound, Distorting Prices…Jim Cramer: "Just Before Earnings is an All-Time Opportunity"

▲ Iran, US, Boeing (BA), Costco (COST), Walmart (WMT)/AI generated image

It has been pointed out that Wall Street's bundled trading surrounding the Iran war is distorting the stock prices of individual companies. This is because the trend of buying and selling together, regardless of corporate earnings, has strengthened. Jim Cramer emphasized that the price discrepancy that occurs before earnings announcements should be utilized as an investment opportunity.

According to CNBC on August 4 (local time), Jim Cramer, host of CNBC's 'Mad Money,' said, “The best part is that real opportunities arise as stock prices become detached from fundamentals until companies report earnings.” He added, “If the value of bundled trades collapses in the face of actual earnings, significant profits can be made.” Bundled trading is a strategy of buying and selling multiple stocks at once based on common themes such as war, inflation, and artificial intelligence, rather than the individual business conditions of companies.

Cramer cited Boeing (BA) as a prime example. Boeing's stock price tended to rise when expectations for a diplomatic solution increased and fall when the Middle East conflict escalated. However, Cramer's judgment is that short-term geopolitical news does not change Boeing's long-term business outlook. He said, “As a company that is not subject to short-term trading by investors, Boeing's value should be assessed by its cash flow and production volume.” He explained that an order backlog of approximately 6,200 aircraft is more important than daily news from the Middle East. Cramer's Charitable Trust, operated by CNBC Investing Club, holds Boeing shares.

Retailers were also traded as a bundle during the war. As geopolitical tensions and rising oil prices increased inflation concerns, investors bought Costco (COST) and Walmart (WMT). The judgment was that as the burden of fuel costs increased, consumers would seek out retailers with high price competitiveness. On the other hand, selective consumption-related stocks such as Ralph Lauren (RL), Target (TGT), and Williams-Sonoma (WSM) became targets for selling. Cramer said, “Costco and Walmart are excellent retailers that always maintain competitiveness,” and “They are worth holding regardless of the war situation.” Cramer's Charitable Trust also holds Costco shares.

In technology stocks, bundled trading spread based on the artificial intelligence industry. Throughout the first half of the year, investors bought AI infrastructure companies while uniformly selling enterprise software stocks. This was based on the judgment that the benefits of expanded AI investment would be concentrated in hardware companies, and software companies that charge fees based on the number of users would see their business foundations shaken. However, as these trades began to reverse, ServiceNow (NOW) and Salesforce (CRM), which have strong earnings competitiveness, showed differentiated trends from other software stocks. Cramer's Charitable Trust holds Salesforce shares.

Cramer acknowledged that bundled trading could temporarily override a company's fundamentals. However, he emphasized that once earnings announcements begin, market attention shifts from the entire industry to individual companies' sales and profits. He said, “It's fortunate to be able to confirm that fundamentals still matter, even during the only four earnings announcement periods a year.”

[Key Summary of Article]

-Jim Cramer pointed out that bundled trading surrounding the Iran war is distorting stock prices regardless of corporate earnings.

-Boeing, retailers, and tech stocks were presented as prime examples of being traded collectively based on geopolitical risks and AI prospects.

-Cramer emphasized that once earnings announcements begin, company-specific competitiveness becomes the criterion for differentiating stock prices again.

*Disclaimer: This article is for investment reference only and is not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*