Jim Cramer names 5 stocks to buy during market rotation

CNBC's Jim Cramer told investors to buy Johnson & Johnson, PepsiCo, Starbucks, Constellation Brands and TJX as high-quality stocks unfairly swept lower by institutional selling during a market rotation.

The rotation out of technology stocks into defensive sectors accelerated Monday, with CNBC's Jim Cramer naming five companies he said were unfairly caught in the selling. Johnson & Johnson, PepsiCo, Starbucks, Constellation Brands and TJX all offer the pricing power and steady cash flows that typically attract capital during rotation trades.

"These are great companies that got caught up in the selling for no good reason," Cramer said on "Mad Money" July 6. "Use this rotation as an opportunity to buy high-quality names."

The Philadelphia Semiconductor Index's 87.8% surge in the second quarter, its best since records began in 1994, had left growth stocks extended relative to defensive sectors, according to Axios. Nvidia traded near $196.58 after the chip sector pulled back on supply glut fears and Michael Burry's bubble warning. GE Vernova, another Cramer favorite, closed at $1,113.11 July 2, up 70.63% year-to-date.

The rotation signals institutional profit-taking after a prolonged tech rally. For investors, Cramer's five picks span consumer staples, healthcare and retail — sectors that could outperform if the rotation broadens into the second half.

The 5 stocks and what they offer

Johnson & Johnson, the healthcare giant with a diversified portfolio of pharmaceuticals and medical devices, trades at a valuation that Cramer called attractive relative to its growth prospects. PepsiCo and Starbucks give investors exposure to consumer spending trends with global brand moats. Constellation Brands, the beer and wine distributor behind the Corona and Modelo brands, benefits from pricing power in the alcoholic beverage market. TJX, the off-price retailer behind T.J. Maxx and Marshalls, offers a defensive retail model that performs well when consumers trade down.

Rotation dynamics favor defensives

The move into defensive stocks comes after a period where technology and AI-related names dominated market leadership. The Philadelphia Semiconductor Index's record-breaking quarter pushed valuations in the sector to levels that made them vulnerable to profit-taking. Cramer's recommendation to buy consumer staples and healthcare names reflects a view that the rotation has further to run.

What comes next

The sustainability of the rotation depends on several factors, including upcoming earnings reports and the Federal Reserve's next policy decision. If institutional selling continues to target growth names, Cramer's five picks could benefit from continued capital rotation into defensive sectors.

This article is for informational purposes only and does not constitute investment advice.