CNBC’s Jim Cramer on Wednesday shared his thoughts on whether companies that recently reported quarterly earnings are investable, based on his newly launched rating system.
“The main reason this market has gotten so difficult is that we finally don’t have earnings that hot anymore, but Wall Street isn’t taking its usual stance of buying stocks that release NABAF results — that’s ‘ not as bad as feared ‘”, according to the “Mad Money”, said the moderator.
“Six months ago you could get away with NABAF all the time. Within two or three days there was forgiveness. Not anymore,” he added.
To keep up with this new market, Cramer has developed a new way of ranking the shares of companies that have recently reported quarterly earnings.
“There are tons of stocks that can now rebound after falling sharply from their highs, but we need to figure out what can make these rallies possible,” he said.
Here’s Cramer’s three-tier system for valuing stocks:
- Exclamation mark (!): This symbol stands for “Good news, which means the stock has a right to rise despite the broader sell-off,” Cramer said.
- Question mark (?): That means the stock “is pretty much going down no matter what,” he said.
- asterisk :
“Profits get an asterisk when something went wrong outside of the company, something you can easily explain. … So maybe it’s worth buying the stock here because it could be forgiven later,” Cramer said.
“Exclamation mark? Yes. Question mark? No. Asterisk maybe, just maybe, and that’s where the money can be made from earnings because they’re the decent ones who haven’t walked yet,” Cramer said.
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Disclosure: Cramer’s Charitable Trust owns shares of Alphabet, Boeing, Meta and Microsoft.