Jim Cramer says some investors are headed for a ‘nasty hangover’

CNBC’s Jim Cramer on Monday suggested that investors are not buying with a clear head and are choosing too many poorly-performing stocks.

“I saw a hammered market, a market where the buyers have gotten drunk as a proverbial skunk, buying the worst of the worst,” he said. “And when you get hammered, you know there’s going to be a nasty hangover on the way.”

For most of the year, Cramer said, Wall Street feared economic downturn and evaluated equities in a sensible “sober” manner. They chose to invest in cash-rich companies like the “Magnificent Seven” mega cap tech stocks.

But as the mini banking crisis receded, the market broadened out and investors “collectively got a nice buzz going,” Cramer said. They looked towards other sectors with strong potential, buying shares of artificial intelligence companies, cybersecurity outfits and weight loss drug manufacturers, he said. But some overindulged, he said, and now the “hammered investors have taken over.”

In one example. Cramer reviewed the recent stock action with Estee Lauder, which finished Monday up more than 5%. The company suffered as its business in China slowed, and it lost customers to discount cosmetics retailer e.l.f Beauty. Cramer said Estee Lauder investors may be “drunk on euphoria” and are betting that other “intoxicated” buyers will take shares off their hands for a higher price.

Cramer predicted investors may go for other stocks that are down significantly for the year next, such as Moderna or Pfizer, both of which are still suffering post-Covid.

“For those who’re slamming them down now and buying stocks under the influence? Let’s hope they have some designated brokers to help them home, otherwise they’re going to have some regrets come morning,” Cramer said.

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Estee Lauder.