Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOGL) have less risk right now, Jim Cramer said in a recent discussion on CNBC.
Saying that responsibility and prudence must play a role in investing, Cramer noted that some of the technology stocks in the market will have to move up from now on without him having a position in them. Why is the host moving away from these stocks? He said that he is exercising a bit of caution.
Cramer said that some of the hottest stocks in the market today have taken on a degree of risk that he is not comfortable with. He added that he will be staying in the sidelines because he does not want to cost people money by being too aggressive in these stocks.
The host explained that the market has seen the rebound taking place in the most expensive stocks. Take for example salesforce.com, inc. (NYSE:CRM) which failed to go down in its latest quarter and has now moved higher. This has created an umbrella in the software-as-a-service cohort, he noted. Furthermore, he said that the rebound accelerated when the IPO market basically closed. Cramer also noted that “one-trick pony” biotech stocks are now also gone.
Citing other technology stocks, Cramer said that he thinks it is time to reassess positions on technology stocks. He noted that he feels chastened by the declines high-flyers in the industry have endured. He said that stocks are going higher in the industry because the market now has buyouts, insider selling and cessation of IPOs. What matters now is risk management, he added.
Comparing the case of Tesla to Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOGL), he said that the company will probably go higher, just not with him along for the ride. He noted that he cannot make a case for the company’s valuation. He added that he feels the same way about Amazon. He noted that he knows a lot of other companies which are inexpensive but have good earnings per share. He said he has no need to recommend stocks which are trading at a high multiple to sales because of the risk. Furthermore, Cramer said that though one can own one of the high-quality software-as-a-service stocks, he cautions that these companies are reaching levels where they were crushed last time.
As for Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOGL), he explained:
“[This] brings me to Google, Apple and Facebook. Here are three companies that actually fit my parameters: strong earnings growth, good sales growth, [and]inexpensive valuations based on the out years. That’s why I own all three for my charitable trust. They’re a little less risky. I want a little less risky after this big move…The bottom line is that I know many of you want me to be more aggressive. I read the tweets. I know many of you want me to say buy, buy, buy to Tesla, you want me to push Amazon every day. Sorry. I’m not going to do that. The scars of March, April and May have only just healed. If the stocks come down, I’ll look at them again. For now, call me selective. Responsibility and prudence must play a role in investing and after this run in the high-flyers, excuse me if I exercise a little bit of both.”
Apple Inc. (NASDAQ:AAPL) shareholders includes Christopher R. Hansen’s Valiant Capital which reported 258,431 shares in the company by the end of March. In the same period, David Tepper’s Appaloosa Management Lp reported 250,378 in Apple Inc. (NASDAQ:AAPL).
Facebook Inc (NASDAQ:FB) investors includes Brett Barakett’s Tremblant Capital which reported 779,460 shares in the company by the end of the first quarter. Another investor in Facebook Inc (NASDAQ:FB) is Peter A. Wright’s P.a.w. Capital Partners which had 25,000 shares in the company by the end of the first quarter.
Meanwhile, Google Inc (NASDAQ:GOOG) shareholders includes Crispin Odey’s Odey Asset Management Group which had, by the end of March, 157,035 in the company. Another hedge fund with a position in the Google Inc (NASDAQ:GOOG) is Panayotis Takis Sparaggis’ Alkeon Capital Management which reported 156,163 as March ended.