Defense stocks should be resilient as debt ceiling talks drag on

As lawmakers are at an impasse over the debt cap, CNBC’s Jim Cramer said Monday to be confident in defensive stocks like health care, discount stores and natural gas.

Cramer looked to the debt ceiling crisis of 2011 for guidance, noting that while history seems to be repeating itself, it’s not as simple as finding out who rallied after the finalization of This agreement.

“You don’t want losers to turn into winners at this point. You want winners who have been winners until the worst of the debt ceiling talks,” Cramer said. “If the talks break down this time, you can bet the focus will be on uncertainty, credit issues and the possibility of a recession, just as we feared a recession in 2011.”

Cramer recommended Oneoka gas pipeline company, which has just announced its merger with Magellan Midstream Petroleum for $19 billion. Although Oneok was down more than 5% at Monday’s close following the merger, Cramer considers the deal a “perfect match”. He cited the success of Oneok in 2011 when stocks performed well despite the uncertainty of the debt limit.

Regarding consumer-focused defensive stocks, Cramer pointed out Chipotle as a safe bet. The restaurant chain recently reported a successful quarter and its stock performed well in 2011.

“Chipotle sometimes trades erratically, but the best time to buy is when you have the most recent information and that information is currently more recent than an al pastor,” Cramer said.

He suggested keeping an eye out for clothing discounters Ross Stores And TJXboth of which are expected to release earnings reports later this week.

Cramer also recommended biogenic And Eli Lily, pharmaceutical companies making significant progress with drugs to fight Alzheimer’s disease. But Cramer said he thought Eli Lilly had a slight advantage because of his popular weight loss and diabetes drug Mounjaro, which he dubbed a “miracle drug”.

“I would like to be less skeptical of a theoretical debt ceiling agreement that collapses or doesn’t materialize perfectly,” Cramer said. “Take these ongoing negotiations with what we know of the history of 2011 and you will be ready for whatever this moment has in store for you. Chances are it won’t be good.

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Disclaimer: The CNBC Investing Club Charitable Trust owns shares of TJX and Eli Lilly.