Jim Cramer says investors should add the so-called “Cloud King” stocks to their buy lists following the Fed’s announcement of a quarter-point interest rate cut this week.
According to Cramer, money has been rotating out of high-quality growth names and into the industrial sectors as Wall Street bets that the quarter-point cut will spur more business investments and give a boost to cyclical and industrial businesses.
“You need to accept that this rotation is happening. It’s what’s driving these stocks,” Cramer said. “The Fed’s rate cut will push money out of the ‘Cloud Kings’ and into the industrials, but your job is not to trade around a rotation: it’s to find high-quality stocks and stick with them for as long as the underlying business stays strong.”
The “Cloud Kings” includes names like Adobe (NASDAQ: ADBE), Salesforce (NYSE: CRM), Twilio (NYSE: TWLO), VMWare (NYSE: VMW), and Workday (NASDAQ: WDAY), stocks which rarely present investors with a pullback opportunity to buy.
All five of these stocks have jumped by double digits so far this year, with Adobe up 32%, Salesforce up 10%, Twilio up 54%, VMWare up nearly 30%, and Workday up 28%. Cramer says these stocks have been riding a secular trend and will continue to perform well, despite concerns about an economic slowdown.
However, each of these stocks are also down for the week following the Fed’s rate cut announcement and President Trump’s announcement of a new round of tariffs on an additional $300 billion worth of Chinese goods beginning September 1 in the ongoing trade war between the U.S. and China.
Adobe is down -3% for the week, Salesforce is down -5.4%, Twilio is down -6.7%, VMWare is down -0.5%, and Workday is down -5%.
“When this kind of rotation gives you a pullback in a group like the ‘Cloud Kings,’ that’s a long-term buying opportunity,” Cramer said.
“Just remember that you can afford to take your time… [because] I don’t think” time is up on this rotation, he said.
Of the five “Cloud Kings,” analysts are most bullish on the enterprise cloud computing customer relationship management platform, Salesforce. Analysts’ average price target for CRM is $180.80, indicating possible upside of nearly 20% over the next twelve months