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Jim Cramer's message is that this market is no longer trading on conviction, but on frantic sector rotations, ETF flows, and whatever narrative happens to be winning for a few hours at a time. In that kind of market, waiting isn't caution. It's an admission that price discovery has been replaced by momentum theater, where even giants like Nvidia and Microsoft get whipped around by mechanical money.
We trade. That's right. Trading is filled with vicious rotational behavior. Masked by seemingly sedate averages, Dow advancing 160 points today. S&P dipping 0.07% and Nasdaq sinking 0.51%. Sometimes we buy hardware stocks and the goods that go into or help build data centers, like semiconductors, semiconductor equipment.
While we sell all kinds of software stocks. Sometimes we sell hardware stocks and buy those same software stocks that we threw away. We do more of the former than the latter, so hardware's generally chart charging higher, while software generally dives lower. But when we get a rotation and the losing software stocks power higher like they did today, they do so with a level of ferocity that makes you feel like the decline's got to be over.
Of course, it feels that way every single time. Yet the rotations never seem to last. Of course, any given day there are tons of other side shows. Healthcare, restaurants, and foods tend to trade up together as we saw today. Contractors, machinery, and builders trade down as we saw today, too. Then there's the 52-week low stocks, the pummeled, that tend to be rally with the software contingent, damage stocks that momentarily levitate.
And then there's everything else. Why is it like this? How can there be such whippy behavior? Because, people, there is no conviction whatsoever. These stocks keep being whipped around thanks to various ETFs that treat stocks like play things, even some of the largest stocks like Microsoft and Nvidia.
I know it sounds ridiculous, but many of these stocks will go up or down on what we call nothing. Meaning small buys from ETF managers who with their orders just jar the whole market. So, what should you do during a rotation like we had today? Well, of course you can sit on your hands. But, here's something I like to do.
May I introduce you to a way to make some money? You go to your machine that you use for stocks. You query it for the top 10 largest losers in the S&P. If you like any of them and you have strong balance sheets and good businesses or but these stocks are on sale nonetheless, then well, guess what? Buy buy buy.
Let me walk you through the process that I did today. First, you decide whether you're a believer in the hardware thesis or the software thesis. The hardware thesis is all about the making of artificial intelligence, both training and inference. The software thesis is about companies like Salesforce, ServiceNow, Workday, and Adobe software and enterprise software, software as a service, all being down stocks that trade together as part of a basket.
The software stocks are wildly emotional traders. They've been trends for ages and are trying to bottom. But, if you had been betting on a bottom in these things so far, you've been crushed. Each time you get a day like today with the software stocks making giant moves, people are convinced that it's real.
They look at ServiceNow up over 8% on a buy recommendation from Bank of America and say it just has to be done going down. It's down 32% for the year for heaven's sake. Or they kick the tires of Salesforce, which is also down 32% and think perhaps it's too was bottomed because Bank of America actually started its research on Salesforce with a sell.
And it rallied 3% anyway. If it weren't for the centrifugal ETF force that took it up, I might say it's done going down, too. But, I just don't know. I recognize that it always feels compelling to bet on the underdog or might you might call them bottom feeders than to go for the otherwise winning stocks that just so happen to get hit very hard today.
But, I want to buy winners on a momentary slide, not losers that may just be resting before the next decline. So, I go down the list of stocks in the S&P 500 that are down the most and see if there's anything that kind of strikes my fancy. Incredibly, today's many of today's market's worst performers were indeed linked to the data center.
Chunghwa Electronics, a material company used by chip makers, is down 5%. We own this one for the charitable trust. It's had a parabolic move even after this pullback. I think it's too expensive for the moment. Carrier Systems is a heating, ventilation, air conditioning company with plenty of data center exposure, but it's a $1,854 stock that's nearly doubled year to date.
I'm not messing with that one. Western Digital is down nearly 5%. It's a memory stock that trades at 46 times earnings. That seems too rich to me. The fairly similar Micron sells for less than 12 times earnings, and it seems compelling down 6% today. I've been waiting for Micron to come down. This may be the opportunity.
Buy buy buy. Next, there's Corning, another charitable trust company with a para- another parabolic move. It's got to come in more than just down 7% The beatdown's not enough to entice me to buy, or at least buy more of it. SanDisk, that stock's up more than 3,000% over the past 12 months. Even up here, it only trades at just 20 times this year's numbers, but that may be too expensive versus Micron.
Got to let it come down more than today's 5% decline. Seagate, again too pricey at nearly 50 times next year's earnings estimates. These are commodity companies. Vertiv had an amazing quarter, the best backlog of any of the data center stocks, but at 53 times earnings, I got to say no thanks. Bottom of this was Gen- U which got blasted by a poor result on a metastatic melanoma cancer trial.
I, along with many others, thought that this trial would succeed. You can't buy a drug stock that falls that much on the first day of decline. Most analysts seem to have keyed on this drug to recommend that stock. It's damaged. There could be some more downgrades. So, what do you do? As someone who's always looking for bargains, I think Micron's the only possibility that hurt in that whole list.
It's the hardware stock that can most easily turn itself around and next move higher. I buy some right here and then wait for another say two to three percent decline to buy more. That's how I get started. Bottom line, I just showed you how to use the rotation to buy something not aggressively but gingerly on the way down as we wait for all the variables I talked about, especially the endless back and forth about the war and about the Strait of Hormuz and nuclear materials to play out. We got to find out whether President Trump's inability to bend Iran to his will
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