Right now, you have to see if a company has business overseas before investing, says Jim Cramer

Key Concepts:

• Foreign country exposure risk
• Cyclicality of companies
• Inflation due to trade embargo with China
• Non-cyclical stocks
• Drug middlemen companies
• Health insurers
• Cybersecurity companies
• "Trump Stocks"

1. The Current Market Environment and Investment Strategy

• The current market is described as "crazy" and difficult, requiring a specific approach to stock selection.
• The strategy involves identifying stocks that can withstand the challenges posed by the current economic and political climate.
• The speaker emphasizes the need to be selective and avoid stocks that are too risky.
• The speaker is willing to be a "slave to this crazy market" to pocket gains during this difficult period.

2. The "Gantlet" for Stock Selection

• A "gantlet" is described as a series of criteria that a stock must pass before being considered for investment.
• Foreign Country Exposure: The first criterion is to avoid companies with significant business operations in foreign countries, especially those that could fall out of favor with the U.S. President. Any American company doing real business in a country that gets on the "bad side" of the president is "finished."
• Cyclicality: The second criterion is to avoid companies that are highly sensitive to economic cycles. The speaker believes that the U.S. is heading towards a period of high inflation due to trade policies, making cyclical stocks risky.

3. Inflation and Trade with China

• The speaker anticipates high inflation due to the trade embargo with China, which he estimates will affect $439 billion in goods.
• China is identified as the "low-cost producer," and the speaker suggests that replacing Chinese goods will require either finding alternative low-cost producers or building automated factories in the U.S.
• The transition away from Chinese goods is expected to be difficult and lead to either higher prices or shortages.
• The Fed's ability to address inflation will be limited due to the "tsunami of government-ordered inflation."

4. Recommended Stock Categories

• Phone Companies (Verizon and AT&T): These companies are recommended because they have little cyclicality, good yields, and are reporting better-than-expected earnings. The price wars among phone companies seem to be over.
• Drug Middlemen Companies (McKesson, Syncora, Cardinal Health): These companies are described as "money machines" that are essential in the current environment. Cardinal Health is highlighted as a company that does more than just distribution.
• Health Insurers (Humana, UnitedHealth, and Cigna): These companies are considered easy to spot and are being closely watched.
• Cybersecurity Companies (Palo Alto Networks (PA) and CrowdStrike (CR)): These companies are recommended because they are not subject to tariffs and have a consistent revenue stream from countries with state-sponsored hackers. They are described as an "annuity stream."

5. Banks and "Trump Stocks"

• The speaker is hesitant to recommend bank stocks, citing the need for more data on their earnings performance.
• The concept of "Trump stocks" is introduced, referring to stocks that are expected to benefit from the current administration's policies.
• The speaker is starting to build a basket of "Trump stocks" and promises to provide more recommendations in the future.
• KeyCorp was liked the previous night, but the speaker is still unsure about owning banks yet.

6. Notable Quotes and Statements

• "That, my good friends, is how you have to think about stocks right now if you're willing to be a slave to this crazy market in order to try to pocket what you can during this difficult period."
• "Any American company doing real business there finished." (referring to countries that get on the President's bad side)
• "China is the low cost producer."
• "These are two money machines no matter what." (referring to McKesson and Syncora)
• "For the cybersecurity firms, countries with state sponsored hackers like China, they are an annuity stream."

7. Technical Terms and Concepts

• Cyclicality: The sensitivity of a company's performance to economic cycles.
• Tariffs: Taxes imposed on imported goods.
• Yields: The income return on an investment, typically expressed as a percentage.
• Trade Embargo: A government order prohibiting trade with a particular country.
• Trump Stocks: Stocks that are expected to benefit from the policies of the Trump administration.

8. Logical Connections

• The speaker connects the trade war with China to potential inflation and economic challenges.
• The need to avoid cyclical stocks is linked to the expectation of economic uncertainty and inflation.
• The recommendation of specific stock categories is based on their ability to withstand the challenges of the current market environment.

9. Synthesis/Conclusion

The speaker advocates for a cautious and selective approach to stock investing in the current market environment. The key is to identify companies that are insulated from the negative effects of trade policies, economic cycles, and geopolitical risks. The recommended stock categories include phone companies, drug middlemen companies, health insurers, and cybersecurity firms. The speaker is also exploring the concept of "Trump stocks" but remains cautious about certain sectors like banks. The overall message is to prioritize stability and resilience in stock selection during a period of uncertainty.