Cramer says don’t get too caught up in top-down analysis

CNBC’s Jim Cramer told investors on Monday not to solely rely on analysts’ top-down, broad market assessments. According to Cramer, it’s imperative to also pay attention to micro-analysis of a company’s performance when buying individual stocks.

“After all these years, I’ve come to know one immutable truth: There’s no monopoly on stock market knowledge,” Cramer said. “I’d much rather put together my own insights about how the economy’s doing based on individual companies than rely on the stock forecasts in aggregate by some sort of mosaic that I don’t believe in.”

Cramer pointed to Procter & Gamble, maker of consumer brands like Tide, Crest and Pampers, as an example of a stock where micro-analysis paid off. Top-down analysts, Cramer said, might fixate on how the Federal Reserve’s rate hikes might affect the company. But Cramer noted the way P&G was able to keep its prices at high levels over the past few years even as it faced headwinds like commodity costs. Now that raw costs are starting to fall, the company is expecting an $800 million tail wind after tax in fiscal 2024, according to a recent conference call.

“Only three times in past 51 quarters has Procter had to cut prices when its raw costs came down,” Cramer said. “The company can pull off keeping prices higher — for you at the supermarket — thanks to its amazing brand management and the power of innovation.”

Cramer stressed that he is not just “cherry-picking” names and instead said there are many companies that often defy macro expectations. He pointed to the recent success of homebuilders Toll Brothers, DR Horton, Lennar and Pulte despite the Fed’s attempts to bring down housing prices. In addition, he stressed that Boeing continues to profit despite the high rates.

“I’m trying to help you make money in individual stocks, not allocate billions of dollars among a host of sectors for a cash-rich hedge fund,” Cramer said. “These big-time professional money managers have so much money under management that individual stocks are just too small for them, and that’s why they fixate on these top-down forecasts, because they can only make meaningful bets in the aggregate.”

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Procter & Gamble.