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CNBC's Jim Cramer: Avoid Oil Stocks, Embrace Bank Stocks Amid Rate Hike

CNBC's Jim Cramer: Avoid Oil Stocks, Embrace Bank Stocks Amid Rate Hike
Jim Cramer

By    |   Friday, 18 December 2015 06:26 AM

CNBC's Jim Cramer said the Federal Reserve's first rate hike in a decade has made one type of stocks a good bet while another sector is an area to avoid.

He also encouraged investors to view the central bank's move as a vote of confidence in the economy.

"The economy more than deserves to get out of intensive care, and it might go to a regular hospital bed for a while and then go into rehab until it is totally healthy. Rehab being rate hikes spaced out over time, with some pain if we get too much gain," the "Mad Money" host said on CNBC.

And he said the rate hike is a good thing for financial stocks because "almost 15 percent of companies in the S&P 500 will earn more with higher rates, namely the banks. They make more money off of customer deposits, and the move will allow banks to charge more on loans, too. The winners in this group are Wells Fargo, JPMorgan and Bank of America because of their large deposit bases," CNBC explained.

Another chunk of the stock market will go back to feeling the pain of lower oil prices, which will mean more stress in the system and more oil companies defaulting.

Highlighting other stock picks, Cramer said:
  • High-flying growth stock Salesforce.com would be the ideal stock for millennials, while old school value tech stock Microsoft would be better for their parents. "Younger investors are in a much better position to take risks with their money, whereas older investors need to be more careful about preserving their capital," Cramer said.
  • With all the chatter about junk bonds lately, Cramer has a hard time believing that investors would really consider them cheap. In fact, he's throwing that conventional wisdom out the window — especially now that the Fed has just raised interest rates for the first time in nine years. "Having been knee-deep in researching the funds that own this kind of paper, I come back and say that the classes of junk bonds are so bifurcated that the notion of 'cheapness' is ludicrous," the "Mad Money" host said. "All I can say is that these people who claim it is cheap tend to have one thing in common — they have some junk to sell you," Cramer said.
  • He touted Take-Two Interactive Software, the company that is behind well-known games such as "Grand Theft Auto", "Red Dead," "Max Payne" and "MLB 2K."
  • On Ziopharm Oncology: "I think that they've got good partners, but you have to understand that this is one of those companies that when you have a Celgene, you have a Biogen, when you have an Amgen still well off their highs, you want to go with the higher, bigger guy! That's my suggestion."
  • On ConocoPhillips: "They say the dividend is safe, the problem is that it is often out of control as we learned with Kinder Morgan. I know that the rating agencies want to downgrade these guys repeatedly. I am not a fan of ConocoPhillips."
But not all financial experts are casting the most positive light on the rate hike.

Peter Schiff, CEO of Euro Pacific Capital, warns investors not to believe the hype that the Federal Reserve’s interest-rate hike reflects confidence in a strengthening economy. No, just the opposite, he told Newsmax TV.

“The next recession is about to begin and there's a good chance that it's already here or it will begin early in 2017,” he told Newsmax TV’s “The Hard Line.”

The Fed on Wednesday lifted its key interest rate by a quarter point to a range of 0.25 to 0.5 percent, up from near zero for the first time since December 2008.

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“The only reason the Fed is raising rates is to try to show that they have confidence in the economy, but the reality is they have no confidence in the economy and they're trying to cover up those fears with this symbolic rate hike. But they're going to have to figure out how to reverse course unfortunately. They're going to be doing QE4 next year, they're not going to be raising rates again,” he said.

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CNBC's Jim Cramer said the Federal Reserve's first rate hike in a decade has made one type of stocks a good bet while another sector is an area to avoid.
jim cramer, stocks, invest, fed rate hike
Friday, 18 December 2015 06:26 AM
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