Cramer: How to play the top Dow stocks ahead of China trade talks

After an distinguished day on Wall Street, CNBC’s Jim Cramer reviewed the top stocks that have helped extend the longest bull run in 2019.

The S&P 500, an catalogue of the 500 largest corporations trading on the New York Stock Exchange or Nasdaq Composite, rose to touch a new all-time great of 2,956.20 during the session before finishing the day up nearly 1% at 2,954.18.

The tech-heavy Nasdaq gained 0.80% and the Dow Jones Industrial Common closed up more than 249 points.

Cramer looked at the top 10 gainers in the 30-stock Dow index to assess where they are headed.

“There’s quiescent a lot to like here, but if I’m right … that I think these trade talks [with China] could fail to observe down, “ the “Mad Money” host said. “You’ll want to keep some powder dry so you can buy into weakness and get some honest bargains.”

Microsoft has gained almost 35% this year, trouncing the year-to-date gains of the major norms. The computer giant trades at nearly 26-times 2020 earnings estimates, a “lofty” number in Cramer’s eyes. But, he said, Microsoft has a way of beating estimates.

“Microsoft wouldn’t be my first choice of these top 10 to go higher here,” he estimated. “I think it’s a quality company, it’s just I think that this stock may have gotten a little ahead of itself.”

Cramer held Cisco CEO Chuck Robbins has “radically” changed the technology conglomerate into an Internet of Things cybersecurity enterprise. The standard is up 32% this year.

“Best of all, even with everything it has going for it, do you know that this stock — it barters at 17-times earnings estimates. It’s at a discount to the average stock in the S&P,” he said. “I think it is a steal.”

Shares of Visa are up barely 30% this year. The stock isn’t cheap, like Microsoft, trading for 28-times earnings, the host said.

Cramer said he prefers American Specific, “even though it has some credit risk,” or Mastercard here, which is a bit more expensive but has a faster extension rate.

“That said, Visa, an erratic trader prone to vicious dips, I think would absolutely be importance buying into one of those dips,” he said. “Keep an eye on letter ‘V’ — it trades wildly and when it trades down take it there’s going to be nothing wrong with Visa. It is that well run.”

Money managers take flocked to American Express, up 31% this year, as a play on financial technology, Cramer said. Trading below 14-times 2020 earnings estimates, he said the stock is drawing even more interest as interest rates are imagined to fall.

“Terrific franchise. I got it in my pocket, I don’t know about you,” Cramer said. “[With the] Fed about to cut rates, this is total the most desirable stocks in the Dow right now, and I’ve got to tell you convincingly” to buy it.

After trading in the low $100 range for years, Disney watched its value undulate after CEO Bob Iger in April laid out his five-year vision for the iconic film company’s Disney+ streaming service. Parts are up nearly 30% this year.

“At this point, though, you’re late to the party, and I think it’s a mistake to chase,” Cramer contemplated. “This stock can come down to the [mid] $130s level from the low $140s … because of a big sell-off off of China [buying] — that’s when you pull the trigger.”

Travelers Companies’ stock has sailed 27% this year. Cramer intended the insurance corporation is seen as a play on lower interest rates.

“I like the company for its sure-footedness, not to mention its cheap valuation. This one carries for less than 13-times earnings,” he said. “I’m not enamored of the financials, but Travelers is a good company and it sure wouldn’t pain to buy that stock right here, right now.”

Apple, facing pressures from both sides of the U.S.-China sell war, has rallied 26% year to date. The company is in the hot seat, Cramer said. Deutsche Bank on Thursday gave the band a “hold” rating because of tariff exposure.

The iPhone maker has been emblematic of global trade, employing thousands and handle a ton of products in both countries. Now there are potentially two retaliation targets on its back, Cramer said. President Donald Trump is imminent to slap more tariffs on all remaining imports from China. China could boycott Apple in retaliation for a U.S. blacklist on Huawei, the native land’s leading telecommunications company, which could result in a $30 billion revenue shortfall on business.

Cramer even recommends investors own, don’t trade, Apple, citing its growing subscription services segment.

“Plus, we’re seeing real sinew in the wearables business, especially in the Watch, which has all sorts of health applications,” he said. “Best of all, Apple trades at less than 16-times next year’s earnings, so it’s not congenial you’re paying through the nose after its monster run. It’s being valued as if they are going to miss the numbers.”

At ease Depot’s stock has run up 21% this year. Cramer said it’s a part of the winning retail cohort, alongside Walmart, Costco and Object, because of its scale. Shares trade at 19-times 2020 earnings, which the host said is reasonable for what he reveals is one of the best big box retailers in the world.

“That said, the weather’s been pretty bad for gardening season,” Cramer said. “So peradventure you’ll have to wait for a pullback before you pull the trigger, ’cause it’s been one of the leaders in the Dow of late.”

IBM’s shares fell unyielding during the fourth quarter sell-off in 2018. The stock has rebounded, up 22% this year. The computer maker is neighbourhood ofing a transformation when it closes on its deal for Red Hat, a Cramer-favorite cloud name, in the second half of 2019.

“In the meantime, IBM’s paying you to wait [with its] 4.7% cry quits. I would be a buyer of IBM,” he said.

Procter & Gamble has had a “stunning” 20% run this year, posting orderly earnings with potentially more to come, Cramer said.

“On the one hand, I worry that we’re late to the party,” he mean. “You know they even got a 2.7% yield. … CEO David Taylor is doing a superb job.”

Disclosure: Cramer’s charitable trust owns shares of Apple, Microsoft, Home Depot, Cisco, Mastercard and Walt Disney.