Jim Cramer named PepsiCo (PEP) his next stock idea on Wednesdays Mad Money. He built the pick on falling oil prices instead of chasing Nvidia or Salesforce.
The CNBC host framed PepsiCo as a value play. He tied it to his broader view that oil is falling and inflation is peaking. Cramer called it a starting point, not yet a position.
A Falling-Oil, Peaking-Inflation Worldview
Cramers process starts with a call on rates and inflation before he names any stock. He said the economy looks stable barring a shock out of Iran or Ukraine.
He pointed to easing crude prices as his clearest sign that inflation is topping out. Oil fell nearly 3% this week as Iran and Oman resumed talks on a Strait of Hormuz shipping corridor.
Cramer also downplayed Federal Reserve Chair Kevin Warsh, whose Jackson Hole debut speech lands Friday. He argued a hike is unlikely while the Treasury is already working to hold down long-term borrowing costs.
PEP has not performed well in the past 6 months. Image Source: Trading ViewWhy PepsiCo Beat Nvidia and Salesforce to the Pick
Tech was the obvious starting sector, but Cramer said Nvidia and Salesforce had already jumped on strong earnings. Buying either now, he said, would mean chasing a move that already happened. He pointed to Nvidias blowout quarter results as an example.
Travel and leisure names failed his test too. He said stocks like Disney and Expedia had already rallied and depend on discretionary spending a soft economy could squeeze.
PepsiCo fit a different screen. Cramer looks for shares trading cheap against their own history with a dividend yield near 4%. PepsiCo has raised its payout for 54 straight years. It now yields roughly 4%, near its highest level in more than a decade.
“I like them low. Some people like them hot. I like them cool.”
Jim Cramer, host of CNBCs Mad Money
Cramer said PepsiCo executives repeated on their earnings call that high gas prices have weighed on sales. Falling oil, he argued, could remove that drag on consumer spending.
Cramer stressed the idea remains a screening result, not a formal position. Whether the valuation gap closes may hinge on where oil and rates move after Warshs speech Friday.