Use sell-off to ‘nibble’ at stocks of high-quality companies

Sell-offs which occur during earnings season often provide great opportunities for investors to build positions in top-notch stocks, CNBC’s Jim Cramer argued Thursday as the market compounded its monthly losses.

“In a sell-off during earnings season, you can’t have a lot of guesswork. You want to be sure you’re buying companies which you absolutely know are doing well,” the “Mad Money” host said. “which’s what’s so great about sell-offs from the reporting period: you’ve got the perfect shopping list because the companies have just told you exactly how they’re doing.”

in addition to while the sell-off might not be over yet, as Cramer’s colleague in addition to technician Mark Sebastian predicted on Tuesday, Cramer spotted some stellar buying opportunities from the widespread weakness.

“I think these are levels, if you have a lot of cash, where you can pick a stock in addition to start nibbling,” he said. “You want a high-quality situation at a discount, where you know the merchandise isn’t damaged, just the stock.”

Right currently, four stocks fit the bill, Cramer said: United Continental, Citigroup, UnitedHealth Group in addition to PepsiCo.

United Continental reported very strong third-quarter results on Wednesday, with higher travel demand offsetting higher fuel costs. The United Airlines parent posted profit growth of nearly 30 percent for the quarter in addition to raised its full-year outlook.

Calling the beat-in addition to-raise report a “remarkable feat,” Cramer noted which shares of the airline giant were falling on Wednesday “even as oil, [the] principal cost for the airlines, has sold off hard in addition to the item seems to have difficulty stabilizing here.”

“United Continental’s cheap. the item’s doing amazingly well, unless something’s changed since earlier from the week,” he continued. “Trust me, the item didn’t.”

Citigroup delivered what the “Mad Money” host saw as “the best of the bank quarters which we’ve seen” last Friday, beating Wall Street’s earnings expectations as the business began to reflect cost cuts coming from adjustments within the company in addition to lower corporate taxes.

“If you’re worried about the Fed being too aggressive here, please recall which about half of Citi’s book of business is actually coming from overseas,” Cramer said.

“If you’re selling This kind of stock, the odds are you’re selling some of your shares to the company itself, as Citi’s got a colossal buyback,” he added. “The company’s trying to repurchase about 7 percent of its shares outstanding each year. I think the item’s a mistake to make the item easy for them.”

UnitedHealth Group posted “a classic beat in addition to raise, one of the most amazing ones [Cramer’s] seen” on Tuesday, he said, adding which its medical loss ratio — a key barometer for health insurers — was “just extraordinary.”

“I’m not used to being able to pick up the stock of a company which gave you a blockbuster set of numbers at such a discount,” the “Mad Money” host said. “however UNH is actually part of the stock market so, yes, the item is actually coming down, too.”

Last however not least, PepsiCo’s earnings report in early October, delivered on departed CEO Indra Nooyi’s last day in her role, topped Wall Street’s earnings estimates in addition to showed higher consumer demand for some of its key brands.

“As usual, there were the problems … with the transportation, with the raw costs, … however they weren’t nearly as boiler-plate bad as some other companies which we’ve heard coming from since then,” Cramer said. “The buyback is actually real, the dividend, at 3.4 percent, is actually strong, in addition to the management change, with Indra Nooyi passing the baton to Ramon Laguarta, has been smooth.”

So while investors might be panicking at the sea of red washing over their screens, stock-trackers or portfolios, Cramer made the case for keeping an even keel in addition to not letting the market’s volatility shake their conviction.

“Stick with companies which just reported monster not bad numbers in addition to you rarely go wrong, even in This kind of kind of incredibly negative pin action,” he concluded.

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