(Business Insider) Jim Cramer is not too sympathetic to investors after Wall Street's bitter Thursday sell-off.
"When everyone thinks they're smarter than Warren Buffett, that's when you're in for a real bruising," the CNBC Mad Money host said on Thursday.
Cramer said: "The visceral nature of the losses — this is the kind of decline we haven't seen since the dark days of late March — has already wiped out a good chunk of the geniuses who crowded into the airlines, betting that they knew better than Buffett after he dumped the whole group."
Markets tanked on Thursday triggering Dow 30's worst sell-off since coronavirus lockdowns kicked in in March. A dire unemployment forecast by the Fed and investors weighing the risks of a second wave of coronavirus caused markets to tank.
The Dow Jones ended the day down more than 1860 points, a loss of nearly 7%.
Shares in United Airlines, Delta Airlines, American Airlines and Southwest Airlines tanked on Thursday, losing between 8% and 16%.
Warren Buffett may have been right
Famed investor Warren Buffett dumped his investments in the "big four" Airline stocks in April.
But airline stocks began to creep up in May over optimism progress was being made towards creating a coronavirus vaccine. More than $5 billion was added to the market capitalizations of the big four US airlines, bringing into question whether Buffett had made a mistake.
A number of amateur traders have been betting against the likes of Buffett, with airline ETF JETS seeing assets surge nearly 3,000% in 3 months, boosted by millennial day traders.
President Donald Trump said Buffett made a mistake when he sold his airline stocks in April. Billionaire investor Ken Fisher suggested the 89-year-old's age might explain why he didn't go on a buying spree during the coronavirus sell-off.
But Cramer thinks Buffett was right indeed.
Cramer said: "I remember what it was like to be a novice investor. And right now there are millions of inexperienced shareholders who are going to be making the same mistakes I did when I got in this business."
Day traders are piling into Hertz, JCPenney, and other bankrupt companies despite the overwhelming odds that shareholders will be wiped out during bankruptcy proceedings.
Stocks investors should be looking at
"You go with companies that will be able to hit their numbers regardless of how badly this economy gets hit by all these new COVID-19 hot spots," Cramer said.
You want stocks with good yields and strong prospects that are well off their highs, like Pepsico, he added.
"You want companies that are reinventing themselves to become something better than the just [plain old] merchant company."
Cramer noted Nvidia, AMD, Broadcom, Paypal, Nike, Apple and Facebook as good stocks to invest in.
"The bottom line in a top market you need to circle the wagons around a few good names you feel comfortable buying more if they go lower because they might in case the neophytes are in there," he added.
