Jim Cramer warns that even high-quality stocks with low price-to-earnings ratios could be battered by a recession

CNBC’s Jim Cramer warned investors on Wednesday that while some stocks with low price-to-earnings ratios look cheap and therefore investable, it’s worth noting that they aren’t always recession-proof.

“There are stocks with incredibly low price-to-earnings ratios that can’t be bought in any way,” the ‘Mad Money’ host said. “Then there are the higher quality ones that you can justify owning if you’re feeling a bit more optimistic about the economy.”

Cramer highlighted Nucor, Toll Brothers, Ford and Whirlpool stocks which have low price-to-earnings ratios and could be good bets if the economy remains stable.

However, since these stocks have already fallen during the height of the pandemic, it is possible that they will continue to fall if the market does not recover, Cramer said.

“If we get a deep recession, the four could go much lower. Keep that in mind if you’re taking the risk,” he said.

Cleveland-Cliffs is a stock with a low price-to-earnings ratio that investors should avoid altogether, he added, predicting the stock has more downsides.

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“When you buy a stock with an extremely low price-to-earnings ratio and the damn thing keeps going down, it’s because those stocks only look cheap because the earnings estimates…are too high,” he said. he declared. “They can go lower, then lower, then lower.”

Disclosure: Cramer’s Charitable Trust owns shares of Ford.

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