The Dow’s top five stocks for the end of 2018 were a defensive group: consumer products giant Procter & Gamble, drugmaker Merck, fast-food chain McDonald’s, telecommunications play Verizon and soft-drink maker Coca-Cola.
“Classic slowdown stock” Procter & Gamble took first place with a 10 percent gain, a troubling sign for those who are worried about U.S. economic growth, Cramer said.
“When Procter’s the best performer, you know something’s wrong with that economy,” he said, acknowledging that the Bounty parent is still a “high-quality company” and has benefited from lower raw costs and higher market share.
“This is exactly the kind of stock you want to own if you’re concerned about a slowing economy,” Cramer said.
Cramer also blessed buying shares of runner-up Merck, the drugmaker behind leading anti-cancer treatment Keytruda. He noted that Bristol-Myers’ massive deal to buy Celgene speaks to the power Merck wields over its competitors.
“They never would’ve done something so radical if Merck weren’t winning some head-to-head trials against them,” he said. “Plus, Merck sports a 2.9 percent yield here, it’s got a rock-solid balance sheet, and, just like Procter & Gamble, it’s a fabulous slowdown stock. You have my blessing to still buy this into weakness.”
Cramer liked McDonald’s, noting that its stock also tends to thrive during slowdowns. He dubbed the stock of Verizon, which sports a 4.3 percent dividend yield and has no exposure to the Chinese markets, an outright “buy.”
Coca-Cola, the only other Dow stock that rallied in the final months of 2018, “is practically the perfect stock for this environment,” Cramer added, noting that it looks cheap considering its 3.3 percent yield and accelerating growth.