Buy stocks that can do well in any market

CNBC’s Jim Cramer explained the key qualities of a growth stock, recommending that investors buy companies that can generate strong revenue and earnings regardless of economic conditions.

“You want big, secular growth stories that can handle high interest rates or a weak economy and have the ability to scale, which means you can see how they could eventually grow into something tremendous,” Cramer said. “These are the kinds of stocks that you can own for years, even decades, and make tremendous returns, as long as you regularly do your homework so that you can bail out if something really goes wrong.”

Companies that can withstand big interest rate increases don’t have to take on as much debt, and their customers don’t depend on financing to make purchases, Cramer said. He emphasized that he is not against all companies borrowing money. Amazon And Tesla’s large sums of money were borrowed early on. However, these two megacaps had “huge opportunities” ahead of them. AMC He was borrowing money “just to stay afloat.”

Cramer suggested it would be wise to examine a stock’s history to determine whether companies can survive tough macroeconomic conditions. For example, he continued, investors should look at how a stock performed during the great recession or brief Covid downturn that followed the financial crisis. He said it wouldn’t be a problem if the stock took a hit as long as the market managed to recover quickly after getting back on its feet.

Cramer also said it’s ideal for a company to have the ability to scale, which means it has the capacity to grow into a larger company.

“When you find a company like the Magnificent Seven that can handle higher interest rates or a weaker economy, you have my blessing to buy those stocks with high price-to-earnings multiples, even if they look expensive,” he said. “Wall Street is willing to pay through the nose for consistently strong earnings growth, and you know what, you should too.”