TLDR
- Jim Cramer warned investors against buying “parabolic” tech and AI stocks, saying the trades often reverse fast
- He said better opportunities exist in overlooked, out-of-favor stocks
- Cramer’s Charitable Trust bought Johnson & Johnson shares while the stock was falling
- He called J&J his favorite drug stock, above Eli Lilly, citing its pipeline and business transformation
- Cramer stressed the need for portfolio diversification between hot and cold names
Jim Cramer, host of CNBC’s Mad Money, told investors on Monday to stop chasing the market’s biggest winners and start looking at what everyone else is ignoring.
Cramer said stocks making “parabolic” moves, especially in tech and AI, are dangerous to buy. He said when he buys into those kinds of moves, he tends to lose money.
“Those are all too hot, hot, hot for me,” Cramer said, referring to high-flying semiconductor and AI names.
Instead of chasing stocks like Intel or Advanced Micro Devices, Cramer said he is doing the opposite. He is buying quality companies that have sold off and fallen out of favor with the market.
His CNBC Investing Club Charitable Trust recently bought shares of Johnson & Johnson while the stock was still dropping. The health-care sector is currently the worst-performing sector in the S&P 500 this year.
“We are buying it in freefall,” Cramer said. “You don’t get to buy the best at a discount very often. When you do, you buy some.”
Why Cramer Is Backing Johnson & Johnson
Cramer said Johnson & Johnson is now his favorite drug stock, a position previously held by Eli Lilly. He cited the company’s drug pipeline and its ongoing business transformation as reasons for his confidence.
Johnson & Johnson, JNJ
Johnson & Johnson has been shedding slower-growing divisions and focusing more on pharmaceutical research. The company has multiple drugs in late-stage development and several recent approvals.
Cramer said recent weakness in the stock has been driven mostly by noise, particularly concerns around talc lawsuits. He argued those concerns have overshadowed real progress inside the company.
He also flagged a pattern with Johnson & Johnson earnings. The stock often gets sold off when results first come out in the morning, then recovers once the conference call begins. “If it gets blasted, try to get some,” he said.
The Case for Diversification
Cramer’s broader point was about how investors build their portfolios. He said owning only the hottest names is risky because sentiment can shift quickly.
“Your portfolio always needs to have a decent mix between what’s hot and what’s not,” he said.
If one area of the market falls out of favor, owning some undervalued names means you still have something working. Cramer said this was a lesson he learned at Goldman Sachs.
“They don’t all go up at once. To which I always said, but something should go up.”
Health care stocks have been hit hard in 2025. Johnson & Johnson shares are down over the past year, with the stock falling around 1.57% in recent sessions alongside continued sector pressure.
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