Tuesday, July 27

These troubled companies could be strong long-term plays

In some cases, buying shares of companies facing lawsuits can pay off if you’re patient and willing to withstand headline risk, CNBC’s Jim Cramer said Wednesday.

Right now, there are five high-profile situations “where lawsuits are or could be front and center” for stocks, Cramer said: the Qualcomm-Apple dispute, the lawsuits facing Johnson & Johnson for alleged ties between its talc and cancer, the Malaysian government’s fraud allegations against Goldman Sachs, the District of Columbia’s recently announced case against Facebook and the potential for litigation against Allergan for selling breast implants that allegedly cause cancer.

If Apple loses the Qualcomm-Apple battle, it could have more downside, Cramer admitted. But if the iPhone maker settles with Qualcomm, the stock could bounce, the “Mad Money” host said.

As for Johnson & Johnson, while a loss could hurt the company, the stock has already shed more than $50 billion in market value, Cramer said. He suggested waiting a week and seeing if the story dies down before buying.

Goldman Sachs will likely have to settle with Malaysian authorities, but that debacle will likely end there, even if it takes months, he said.

Facebook’s Cambridge Analytica ties might hurt in the short-term as that lawsuit progresses, he added, but he didn’t think they would derail the company’s business model.

And Allergan is a wait-and-see situation for Cramer, who said that while the danger of its implants was well-known, the headline risk will be high for the foreseeable future.

“Every one of these lawsuits is a serious taint,” he acknowledged. “However, the stocks have already been hammered. It’s more headline risk going forward. But if you can handle the negative headlines and you can be very patient, I actually think you’re getting some very nice long-term buying opportunities, but the operative term — please — is, indeed, long term.”

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