CNBC’s Jim Cramer on Wednesday said he’s becoming more careful when it comes to highly-speculative stocks, saying it’s time for investors to worry about market froth.
“I can no longer be so sanguine about these super speculative stocks that keep roaring around here. I can no longer just say it’s going higher,” he said. “I will be more circumspect in the future.”
Cramer said he’s felt speculative stocks would largely keep roaring because there is such high-demand for them. But he said it’s now worthwhile to “figure out how many of these red-hot stocks have overshot what they might be worth” as the indexes close lower for the second day in a row.
One catalyst for Cramer’s heighted caution was recent commentary from Federal Reserve Chair Jerome Powell. The central bank leader said Tuesday that weakness in the labor market is outweighing concerns about stubborn inflation. Powell indicated that stocks are overvalued, saying “by many measures, for example, equity prices are fairly highly valued.”
Cramer said he’s also concerned that viewers are frequently asking him about speculative stocks, saying there has been a a slew of questions that “test the balance…of my risk tolerance.” While he has accepted these names over the past several weeks, he said it’s now time to “rein it in.”
Nuclear is one sector with many speculative companies that may have grown too hot, Cramer said, pointing to Energy Fuels, Oklo, Nano Nuclear and BWX Technologies. He also mentioned “crypto derivatives,” as well as quantum stocks that could see success in the long term, but not anytime soon, naming IONQ, D-Wave Quantum, Rigetti Computing and Quantum Computing.
He encouraged investors to consider their risk tolerance — but he didn’t steer them completely away from speculative stocks, saying it’s ok to have one riskier investment in their portfolios.
“I’ve enjoyed blessing these speculative names and, so far, it’s great, it’s been incredibly right,” Cramer said. “But after that soul-searching lightning round and the words from Jay Powell, I’m going to be adjusting my view.”
