If you contain your losers, the winners will take care of themselves. That was Jim Cramer’s advice to his Mad Money viewers Monday as the market once again split into two distinct factions.
On one side of the battle are the seasoned investors, the ones who have been trading for years and know the economic cycle. These investors know the economy is about to boom and they’re snapping up industrial stocks like there’s no tomorrow. Names like Emerson Electric (EMR) – Get Report, Ingersoll Rand (IR) – Get Report and Honeywell International (HON) – Get Report are practically invisible to the other camp, but they’re the stocks that are working themselves higher every week.
On the other side of the divide are the younger, less experienced investors. These investors are betting big with their stimulus checks and are hooked on commission-free trading. For this group, it’s all about flashy momentum stocks, like Tesla (TSLA) – Get Report. Even the common stock is not enough, they demand more gains and excitement and use call options to get it.
But call options only work when a stock is roaring higher. To date, Tesla is virtually flat for the year. That’s why the momentum stocks, along with the once-hot SPACs are now getting crushed. All of the red-hot names of 2020, from Zoom Video (ZM) – Get Report to Peloton (PTON) – Get Report have hit a wall, leaving the younger investors without much of a backup plan.
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At the time of publication, Cramer’s Action Alerts PLUS had a position in HON.