The coronavirus pandemic has created a lot of so-called “new normals” in our economy. But Jim Cramer told his Mad Money viewers Tuesday that not all of them are sustainable. Once vaccines begin to usher in a bit of the “old normal,” some stocks will begin to fizzle. Others will have staying power.
“You can’t paint with too big of a brush,” Cramer cautioned. Some stocks, like DocuSign (DOCU) – Get Report, are a vast improvement over signing documents in person or waiting for them in the mail. That’s why the rally in DocuSign is sustainable. The same applies to PayPal (PYPL) – Get Report, which has become the de facto payment platform of the online age.
The same does not apply for the rally in rival payment platform Square (SQ) – Get Report. Cramer said Square is good, but not great, and can easily be copied. He was also bearish on Peloton (PTON) – Get Report in an era when people start heading back to the gym, as well as on Kimberly-Clark (KMB) – Get Report and Coca-Cola Co. (KO) – Get Report, two stocks that he said will be among the first to sell off once investors return to growth stocks.
Even in the race for a vaccine there are winners and losers, Cramer said. Pfizer’s (PFE) – Get Report shares have fallen 10% since the company’s vaccine began shipping because vaccines are a tiny part of what the Pfizer does. Rival Moderna’s (MRNA) – Get Report shares have rallied, but Cramer said once Johnson & Johnson’s (JNJ) – Get Report vaccine is approved, Moderna will likely suffer a hit to its share price.
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When the Party Ends…
On Wall Street, dreams have a limited shelf life, Cramer cautioned viewers. Back in 2018, the cannabis stocks were all the rages as investors anticipated legalization in Canada. The move was bolstered when Constellation Brands (STZ) – Get Report took a stake in Canopy Growth (CGC) – Get Report, one of Canada’s largest cannabis growers.
But anyone who’s seen the chart of Tilray (TLRY) – Get Report knows how this story ends. Reality was far less exciting than the hype and investors abandoned the group en masse. That’s because while investors get excited over total addressable markets, eventually they will want revenue and earnings.
We can see the same story playing out today in three different sectors, Cramer warned. First are the electric vehicle stocks, where everyone is coming public in the hopes of becoming the next Tesla (TSLA) – Get Report. The only problem? Most of these special purpose acquisition mergers are years away from even producing a product.
Cramer said there’s equal hype in the sports betting space, with stocks like Penn National Gaming (PENN) – Get Report and Draft Kings (DKNG) – Get Report taking an early lead in what certainly will becoming a competitive space. Lastly, Cramer cautioned against the CRISPR stocks hoping that human genome editing will usher in the cure for cancer and other ailments. Genomics is indeed a hot science, he said, but it’s also incredibly risky.
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At the time of publication, Cramer’s Action Alerts PLUS had no position in the stocks mentioned.