Stocks have recently retreated as Treasury yields continue to rise. To navigate this market turbulence, CNBC's Jim Cramer offers some promising insights.
"We're in an unusual situation, but skyrocketing bond yields are bad news for the vast bulk of the market. The mega-cap techs are the one big exception. You want to make it through this difficult moment?" he asked in a recent "Mad Money" segment. "You need the Magnificent Seven, and then the rest."
By Magnificent Seven, Cramer means seven mega-cap companies: Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL), Nvidia Corp. (NASDAQ:NVDA), Tesla Inc. (NASDAQ:TSLA) and Meta Platforms Inc. (NASDAQ:META).
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These companies have been pivotal in propelling U.S. stock market gains this year. But recently, that momentum appears to be pausing.
For instance, Apple shares have declined by 7.8% over the past month, while Amazon and Nvidia are both down by over 8% during the same period.
But Cramer still likes the group.
"Think about who in the modern age has an indispensable product? How about seven of them? I got them," he said.
Besides having products that are widely adopted, these companies also stand out to Cramer because of their strong cash positions.
Some of these tech giants have been accumulating cash for years. And according to the "Mad Money" host, now is the time these cash reserves begin to show serious returns.
"We used to look at their gigantic cash positions and their cash management attempts to try to bring in a little extra income as just a kind of waste of time, an abstraction," Cramer said. "Now they're huge winners, and I think you'll begin to see a line item in their quarters, the money they make off their cash, that could finally offset some of their miserable losses from that darn strong dollar."
He pointed to Apple as an example.
According to Apple's latest earnings report, the company's cash, cash equivalents and marketable securities totaled $166.5 billion as of July 1.
"I always felt badly for Luca Maestri, the brilliant CFO [chief financial officer] of Apple, as he frantically tried to make a little money with Apple's cash hoard. Now I can't wait to see how much Apple makes this cash with much higher rates," Cramer said. "I know it's not something they want — they make technology — but now they're making money on their money."
Other tech giants also have considerable cash holdings. For instance, Alphabet had $149.6 billion of cash and investments at the end of June, while Microsoft had $121.1 billion.
Cramer is not alone in his confidence in the Magnificent Seven; Goldman Sachs also sees potential in the group.
In a recent note to investors, Goldman Sachs strategists Cormac Conners and David Kostin pointed out that these seven tech giants have a price/earnings-to-growth (PEG) ratio — a valuation metric that takes into account expected earnings growth and not just current earnings — of 1.3, compared to 1.9 for the median S&P 500 company.
"The divergence between falling valuations and improving fundamentals represents an opportunity for investors," the strategists wrote.
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