'Don't be a hero' — Cramer says unprofitable stocks may have even more room to fall

Investors should continue to shun money-losing companies, CNBC’s Jim Cramer said Thursday, contending the turbulence that dominated earlier this year has returned with vigor.

“It’s an unforgiving time. We’re back to the dynamic that defined January through mid-June,” the “Mad Money” host said. “So don’t be a hero right now, because there’s no telling how low some of these unprofitable stocks can go, but be happy that we’re so oversold that the good stocks are going to start winning.”

Cramer’s comments Thursday came on the heels of a mixed session for U.S. stocks. The Dow Jones Industrial Average and S&P 500 overcame selling earlier in the day to finish higher, snapping four-day losing streaks. The tech-heavy Nasdaq Composite, however, declined 0.3%. It’s now fallen in five consecutive sessions for the first time since February.

Cramer has said since late 2021 that the Federal Reserve’s tightening cycle necessitates a shift in approach: out with the high-flying tech stocks that prioritized revenue growth over profitability, and in with more slower-growing — some might even say boring — companies that make money and return some of it to shareholders via buybacks and dividends.

“Wall Street … loves the latter and loathes the former. And a lot of people still don’t get it,” Cramer said. While market sentiment improved from mid-June to mid-August, Cramer said Okta’s nearly 40% decline Thursday is evidence that money-losing companies are still out of style in the Wall Street fashion show.

“Okta’s now a pariah, along with hundreds of other companies — especially the ubiquitous and, in some cases, ruinous software companies — that embraced the same strategy: pursuing revenue growth at the cost of profitability,” Cramer said.