CNBC’s Jim Cramer said Monday that rising oil prices are fueling a familiar rotation across the stock market, which took it on the chin to start the new trading week.
“Get ready for some Pavlovian trades,” the “Mad Money” host said, referring to the classical conditioning behavior. “They will work for the moment because they always do.”
Oil prices surged Monday after President Donald Trump announced he was reinstating a blockade on Iran in the Strait of Hormuz. West Texas Intermediate crude jumped 9.4% to settle above $78 per barrel, while Brent international crude climbed 9.6% to just over $83. Cramer said that Wall Street’s response was predictable, with investors piling into companies that typically benefit from higher gasoline prices while dumping stocks more vulnerable to rising fuel costs.
Cramer pointed to refiners as likely winners, as they can quickly pass higher fuel costs on to consumers at the pump. Cramer singled out Valero Energy as his top pick, calling it the most “pure play” way to benefit from tight refining capacity. Shares of Valero jumped roughly 5% on Monday.
Chemical giant Dow Inc. was another standout for Cramer. He said the company should benefit if disruptions in Persian Gulf production from overseas competitors. “Dow uses domestic energy, which is a lot cheaper. Total win,” he said. Dow Inc. shares rose more than 4%.
Cramer also highlighted fertilizer producer Mosaic, arguing higher energy costs immediately improve its competitive position. “Gulf companies produce a ton of fertilizer. It’s a commodity product. Iran shuts down the gulf, Mosaic becomes the low-cost producer instantly.” Mosaic stock gained nearly 4% in the session.
Discount and off-price retailers can also benefit in times of higher oil, arguing consumers typically trade down as gasoline prices rise. While dollar stores fit that theme, Cramer said Walmart and CNBC Investing Club name TJX Companies are the better investments.
Walmart was up nearly a percent Monday, while TJX was down about a half-percent. While those moves were not as pronounced, they were certainly relative outperformers with the S&P 500 closing down nearly .8% and the Nasdaq sinking about 1.5% on the day.
“Walmart didn’t have the best quarter, but it’s rolling back prices in a way that should bring people right back to the stores,” Cramer said. He called TJX “the real bargain,” saying the off-price retailer is well positioned to benefit as traditional retailers unload excess inventory.
