Pick out the obvious winners

CNBC’s Jim Cramer detailed his approach to investing in high-quality, growth stocks, telling investors that it’s vital to look for companies with impressive track records.

“These hero stocks are hard to find if you’re picking them at random,” he said. “For anyone with eyes to see, we’re talking about obvious winners who keep winning year after year.”

He divided some of the best performers of the past 20 years, the megacaps, into two groups: FAANG – Metaformerly known as Facebook, Amazon, Apple, netflix And Google – and The Magnificent Seven – NvidiaAmazon, Alphabet, Apple, Meta, Microsoft And Tesla’s.

Cramer examined the returns of the FAANG and noted that most of them outperformed the FAANG. S&P 500 and double-digit gains have been made over the last decade. He suggested these stocks were “hiding in plain sight,” saying he had recommended them frequently over the years. Cramer emphasized that he doesn’t recommend investors buy any stock that looks like it’s doing well, most of them don’t have a solid track record and their gains are “mostly the product of an over-enthusiastic public and greedy investment bankers trying to feed the maddening stomach.”

quoted research From economist Hendrik Bessembinder, who studied the performance of stocks from 1925 to 2023 and discovered that a very small number of individual stocks produced the bulk of market gains. Bessembinder found that thousands of stocks made money, but not enough to justify an investment against an index fund, while 17 stocks produced tremendous returns, Cramer said. These high-yield stocks are relatively well-known companies, Cramer said. Boeing’s, IBM’s, Coca Cola, Deere And Johnson&Johnson.

“I’m always on the lookout for not just Amazon, but the next Amazon, the next Netflix, or the next Nvidia. When the Magnificent Seven lose their glory, believe me, there are seven more waiting to be found,” he said. “And they might be too obvious, too. But as long as I think these proven winners can stay strong and be successful, I’ll stick with them.”

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Disclaimer CNBC Investing Club Charitable Trust owns shares of Nvidia, Microsoft, Home Depot and Amazon.