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Jim Cramer warns even prime quality low price-to-earnings stocks could get beaten down by a recession


CNBC’s Jim Cramer warned investors on Wednesday that while there are some stocks with low price-to-earnings multiples that look low cost and subsequently investable, it’s price noting that they don’t seem to be all the time recession-proof.

“There are stocks with insanely low price-to-earnings multiples that cannot be bought under any circumstances,” the “Mad Money” host said. “Then there are the higher-quality ones that you may justify owning if you happen to feel slightly more sanguine in regards to the economy.”

Cramer highlighted Nucor, Toll Brothers, Ford and Whirlpool stocks which have low price-to-earnings multiples and may very well be great bets if the economy stays stable. 

Nevertheless, because these stocks have toppled before throughout the height of the pandemic, it’s possible they may proceed to fall if the market doesn’t recuperate, Cramer said.

“If we get a steep recession, all 4 could go much lower. Keep that in mind if you happen to take the chance,” he said.

Cleveland Cliffs is a stock with a low price-to-earnings multiple that investors should avoid completely, he added, predicting that the stock has more downside to it.

“Once you buy a stock with an especially low price to earnings multiple and yet the darned thing still goes down, that is because these stocks only look low cost due to the indisputable fact that the earnings estimates … are too high,” he said. “They’ll go lower after which lower after which lower.”

Disclosure: Cramer’s Charitable Trust owns shares of Ford.

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