Jim Cramer names 4 stocks that can currently be bought at a discount

CNBC’s Jim Cramer on Thursday offered advice about how to find the right time to buy great stocks at a discount. He said it’s important for investors to distinguish between stocks that are on the decline for legitimate reasons and ones that are seeing losses due to misperceptions.

“The great ones never come cheap. But…they can be cheaper from where they were,” he said. “Sometimes all you can hope for is get a chance to buy a stock of a terrific company at a discount when the market is at an all-time high.”

According to Cramer, there are some on Wall Street who believe there’s never a good time to buy high-quality stocks. But he said he disagrees and named four companies that he thinks can be bought right now at lower levels: Costco, Home Depot, McDonald’s and Starbucks.

Shares of Costco went down after the grocery giant shared comparable sales figures that were slightly lower than investors expected. Cramer said he loves Costco’s subscription business model, which lets it set low prices for consumers while making money from membership dues. He said the retailer’s current stock price is a buying opportunity that doesn’t come around often.

Many investors see Home Depot as synonymous with the housing market, Cramer said, which has been poor as of late. But according to him, Home Depot’s business is not just about home sales — it’s also geared towards remodeling and renovation. He said the retailer is improving its position in those categories by making acquisitions as it waits for the housing market to return.

Some on Wall Street are worried about Starbucks because President Donald Trump just hit its main coffee supplier, Brazil, with a 50% tariff, Cramer said. But he said Starbucks, with its large scale, is better suited than its competitors to find a cheaper source of beans. He also expressed faith in the company’s CEO, Brian Niccol, who is credited with orchestrating a successful turnaround for burrito maker Chipotle.

A number of money managers think fast food giant McDonald’s has “lost its way,” Cramer said, and the stock has gone “from a perennially positive performer to a real dog of late.” He said it’s usually a good idea to buy McDonald’s when the stock falls out of favor on Wall Street because it has the scale and marketing to navigate the current economic environment.

Cramer stressed that buying these companies when they’re down minimizes the likelihood of starting with a bad cost basis, which he said can happen to investors who “chase things on the way up,” get discouraged and end up selling on weakness.

“Does this mean we’ve caught the bottom in McDonald’s or Costco or Home Depot or Starbucks? Of course not. Nobody’s that good,” Cramer said. “But what’s most important is that you aren’t buying these high-quality franchises anywhere near the top.”

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Disclaimer The CNBC Investing Club Charitable Trust owns shares of Costco, Home Depot and Starbucks.