Bargain or minus deal? Jim Cramer explains: When it’s worth getting in when prices are low

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• Distinguish bargains from bad deals
• Industry focus
• Still uncertainties on the stock market

Entry when prices are falling?

For some it’s a curse, for others it’s a blessing when the price of a share falls. A fall in the price can tear a painful minus into the portfolio of previous investors, but for newcomers – or also subsequent buyers – low prices often offer favorable buying opportunities. However, there is no guarantee that the price of a share will actually recover after the price drop. But how do you know if a falling stock is actually a bargain or a downturn?

Jim Cramer: Then an investment can be worthwhile

Stock market expert and TV personality Jim Cramer knows the difference: In his “CNBC” show “Mad Money”, the presenter explained how bargain purchases can be identified. It is essential to identify the respective industry of the share. If the company belongs to a sector that will continue to exist in the future, the stock could be worthwhile as an entry point at a bargain price. However, if it is a share from a stricken industrial sector, investors should take this as a warning signal and avoid the paper as far as possible, according to Cramer. “My advice is simple: tech blowdown? Think of it as [mögliche Kaufgelegenheit,]” said the entrepreneur in his program. “Financial garbage? Let’s just say stay away.”

Skyworks Solutions vs PayPal

Cramer was alluding to the shares of the semiconductor manufacturer Skyworks Solutions and the payment service provider PayPal, both of which presented disappointing quarterly results in the first quarter of 2023 – and whose shares dived after the figures were presented. The difference between the two plagued stocks: Skyworks Solutions justified the drop in profits with Google’s Android and small smartphone manufacturers from China, but did not put the blame on the major customer Apple, according to Cramer. That helped the stock recover. However, the situation is different with PayPal. Although the payment service provider was able to increase sales and profits, the forecasts for the second quarter of 2023 fell short of expectations. The share price then fell because the company “lives in the wrong neighborhood,” the moderator explained. “PayPal was once the darling of e-commerce. It looks more like a bank these days and right now bank stocks are poison.”

Nevertheless, caution is advised

Irrespective of Cramer’s advice, however, investors should not forget that such an assessment is no guarantee of a sustainable recovery. The stock market often works differently than expected. So even a stock that looks like a safe deal at first glance can turn out to be a bad deal. Although the chart analysis can have a supportive effect, you should not rely on it.

Editorial team finanzen.net This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.

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