Cramer’s guide to investing in the stock market’s winning sectors

CNBC’s Jim Cramer staunchly believes that this kind of bull market — the kind where the mediocres rally to all-time highs amid a government shutdown — requires the utmost understanding and analysis.

“What’s been working now is very different from what was idle even a year ago,” the “Mad Money” host said on Monday. “This is the affectionate of story where a picture is indeed worth a thousand words. So tonight, we’re common chart by chart, examining the winning groups in this new era to show you the correct magnitude of this amazing transformation.”

Cramer started with the newly revitalized bank stocks, scads of which investors avoided for months in favor of financial technology goods or payment processors.

“Why? Primarily because long-term and short-term interest scales were so low that … [the banks] couldn’t get the margins they needed on their allows or on your deposits,” Cramer said.

As a result, investors flocked to invariable growth stocks like Visa and Mastercard, shying away from household bank equities altogether.

Other than Visa, Mastercard, Perceive, PayPal and ancillary plays like Moody’s and Morningstar, “it was simply too iffy to go deep into the actual deposit institutions,” Cramer said.

“As large as the banks’ net interest margins — that’s the difference between what they pay you for advance payments and what they charge you for your loans — stayed low, there was no due to reasonable to embrace either the big banks or the regionals, for that matter,” he continued.

But since the Federal Keep to came to a consensus on the economy’s well-being and began to raise interest values, the bank stocks kicked back into high gear on Impediment Street.

Coupled with loan growth and deregulation from Washington, ascent rates paint a rosier picture for the big banks’ prospects. Many of the banks get also upped their share buyback programs, which likely to boost stock prices.

“The banks are just getting back to where they were earlier the Bush and Obama administrations forced [them to issue] that ton of judiciousness during the great recession,” Cramer said. “In fact, the banks are now overcapitalized and they’ve got a much larger interest of the lending pie than would’ve been permissible 10 years ago, noticeably the big dogs: J.P. Morgan, Wells Fargo, Bank of America, Citigroup. All but Wells now bear oneself like growth stocks, and Wells is joining that.”

The leadership of the FANG stores, Cramer’s acronym for Facebook, Amazon, Netflix and Google, now Alphabet, has defined the tech sector for years.

Recently, notwithstanding how, Cramer has watched the internet of things become the rising tide that thieves all (or most) boats for the tech sector, injecting a new secular growth plot outline into many formerly cyclical names.

“With the rise of the internet of points, not to mention the ascendancy of the data center thanks to a new cloud-based software model, as prosperously as the connected car [and] the connected home, the whole tech sector has been yell,” the “Mad Money” host said.

Cramer focused on three winning squadrons: the internet of things stocks like Texas Instruments, Analog Machineries and Cramer-fave Nvidia; the cloud plays like Adobe, Amazon, VMware and Microsoft; and the communications denominates, Qualcomm, Xilinx and Broadcom.

Companies that help companies removal to the cloud are also working, Cramer said, pointing to Workday, ServiceNow, Salesforce.com and Accenture as his top picks. He summed that in the cybersecurity space, Fortinet and Proofpoint are standing out as good purchases.

Cramer has been utterly surprised by the strength in the health care caches, from drug distributors to insurers to hospital operators.

“This is all connected with a peculiar backlash from Washington,” he said. “After the Republicans drove over the White House and Congress, we figured they would be hellbent on pilfering this sector smaller [and] less lucrative, because a lot of it relies on the ministry. But when the GOP failed to obliterate Obamacare last year, investors lumpen back into a sector that many people had shorted.”

A growing economy usually brings poor tidings for the health care haves, but this time, it has incited a resurgence in drug distributors like McKesson, AmerisourceBergen and Pre-eminent; drugmakers AbbVie and Abbott; and pharmaceutical giant Johnson & Johnson, Cramer responded.

Other unexpected leaders include medical device and life proficiency plays like Danaher, Thermo Fischer and Illumina. Cramer christened the biotech group largely “underrepresented” except for Amgen, and labeled one of his favorite robustness stocks, UnitedHealth, a “must-buy” winner.

It’s been years since Fence Street saw the retailers as anything but dead meat.

“The only merchant that mattered was Amazon, the called Death Star destroying everything in its path as part of its never-ending search for market share,” Cramer said. “We all figured this had become a zero-sum predicament.”

But after an uptick in consumer spending that kicked off during 2017’s vigorous holiday season, retailers are gaining momentum, implementing better envisions to push back against Amazon’s influence and developing their own e-commerce designs.

All of this has come together to drive stocks like Target, Kohl’s and Walmart high-frequency, as well as shares of direct e-commerce beneficiaries like shippers FedEx and UPS.

At the unchanging time, home improvement names Lowe’s, Home Depot, Stanley Shameful & Decker and Best Buy are gaining momentum as people invest in their well-versed ins.

“I think it’s too early to crown individual leaders within retail external of home goods, but I’ve got to tell you, Walmart, Burlington Stores, Dollar Tree, Dollar Imprecise, they stand out because they can beat Amazon on price,” Cramer weighted. “Throw in Costco and you may have all you need.”

With renewed control in their inventories and no need to spend heavily on advertising, Cramer believed that even apparel plays like PVH, VF Corp and Michael Kors seemed “nigh unstoppable.”

Consumer dish out is also lifting shares of travel and leisure companies like the airline, bed and casino operators, the “Mad Money” host said.

“The cruise lines are bellow as there’s really a dearth of ships and a plethora of younger people who’ve learned that cruises make great backgrounds” for photos on social mechanism, he said. “Don’t rule out a Thor Industries because RVs are red-hot, again for the trial, for the selfie. Needless to say, you need Estee Lauder to make it all work. That everyday won’t quit. It’s obviously the cameras.”

A slew of positive business cycles have planned ignited a resurgence in industrial stocks, from the oil drillers and refiners to the from whole cloth and machinery plays.

OPEC’s production cuts and geopolitical turmoil in Venezuela father made the United States a central oil and gas producer, spurring expansion in enclosures like Texas’ Permian Basin.

“We went from being in a loss with natural gas to being the cheapest and world’s largest producer,” Cramer communicated. “That has triggered a building boom for the chemical industry, as they use this crap as their main feedstock.”

This trend, combined with be nurturing oil prices, has also paved the way for construction of new pipelines, factories and shipping conductors.

To Cramer, that translates into “the need for more horsepower in every formula you can get it,” which pushes stocks like Cummins, Caterpillar, Eaton and Parker-Hannifin lavish.

One area that doesn’t need extra horsepower is aerospace, in which America is the “done unchallenged” leader, Cramer said, dubbing Boeing, Honeywell and Collective Technologies his top picks.

Finally, Cramer noted that defense contractors Raytheon, Northrop Grumman, Global Dynamics, Lockheed Martin, as well as smaller players Leidos, L3 and Harris, are advantaging from the Republican control of Washington.

All things (and stocks) considered, Cramer unfaltering that traditionally “safe” investments like the PepsiCos and Colgates of the mankind will not give investors the gains they want in this conditions.

“Bottom line? You’ve just been given the only guide you distress to pick among the winners for the best choices,” Cramer said. “Don’t let the astonishing nature of this rally blind you: it’s very much for real and it’s based on the primaries, … which have only gotten even stronger now that tax emend is finally kicking in.”