Be ready to snatch up these 8 software stocks when they bottom, Jim Cramer says

CNBC’s Jim Cramer on Thursday gave investors a list of eight software stocks to keep on their shopping lists for the future.

“I’m adamant that it’s still way early to buy some of these stocks. …  But eventually, even these heinous stocks, formerly high-flying tech stocks, will get so cheap that they’re going to find a bottom,” the “Mad Money” host said. 

“While I don’t see that happening until the [Federal Reserve] is further along in its tightening cycle – and it just started – these things tend to sneak up on you. They happen when you’d least expect it,” he added, referring to the Fed’s plan to implement a series of rate hikes and tighten its balance sheet to offset inflation.

Cramer’s comments come after the tech-heavy Nasdaq Composite dropped 2.07% on Thursday. The Dow Jones Industrial Average slid 1.05% while the S&P 500 decreased 1.48%.

To come up with the list of investable software stocks, Cramer looked for companies that fit the following two criteria:

1. Have more than 20% revenue growth
2. Have more than 20% operating margins

This method helps weed out the profitable companies from the unprofitable ones, which is crucial in the current market, Cramer said.

“The market … has zero patience for companies that aren’t making money. Doesn’t matter how fast you’re growing, unprofitable businesses have become untouchable,” he said.

Here is Cramer’s list of eight tech buys for the future:

1. ServiceNow
2. Salesforce
3. ZoomInfo
4. Paycom
5. Paylocity
6. PubMatic
7. Definitive Healthcare
8. Clearwater Analytics

Cramer caveated the last two recommendations on the list with a warning that he’s not as familiar with them as he wants to be.

“Unlike the other names I’ve mentioned, these two are only profitable on an adjusted basis. When you use the GAAP numbers, Clearwater’s only breaking even and Definitive Healthcare is losing money. So, I want to take a closer look before I pound the table on either one, but I think I’ve got to do some homework on it now,” he said.

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

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