We recently compiled a list titled Jim Cramer’s Latest Watchlist: 10 Stock Picks You Need to Know. In this article, we will look at where Apple Inc. (NASDAQ:AAPL) stands among other stock picks in Jim Cramer’s latest watchlist.
In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.
Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.
“Today, recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Jim Cramer notes that Wall Street has largely ignored Apple Inc. (NASDAQ:AAPL)’s new iPhone features, but he expects consumers to embrace them. He advises focusing on buying high-quality stocks during market dips rather than reacting to short-term volatility. Cramer suggests that if Apple Inc. (NASDAQ:AAPL) stock drops tomorrow, it could be a good buying opportunity. Overall, he recommends staying calm and strategic instead of reacting to daily market swings.
“Today Apple Inc. (NASDAQ:AAPL) introduced a new phone, and nobody seemed to care. I think this is one of those product launches that gets lost on Wall Street but is eventually loved on Main Street. Wall Street doesn’t care about better battery life, autocorrect spell-checks, or the ability to take a picture of a restaurant and immediately see reviews. It doesn’t care about AI functionality. The Street just wants to know the rollout schedule so they can model earnings. But Main Street wants everything Apple Inc. (NASDAQ:AAPL)’s offering, and you know the wireless carriers will push the new iPhone 16 like they do with every iPhone iteration.
Which brings me back to sitting on your hands. Most of the big moves are a product of algorithms that spit out strategies, creating tons of volatility. Rather than trying to figure out what’s driving these irrational moves, you should focus on buying dips in high-quality stocks when there’s no data—like Apple Inc. (NASDAQ:AAPL) , which I would have told you to own, not trade. At the same time, I’d use the strength to sell some of the defensive stocks that have gone parabolic—they seem risky to me.
And of course, you need to decide whether to buy Apple Inc. (NASDAQ:AAPL) stock tomorrow morning, right when the negative Wall Street analysts clash with the rabid desire of Apple users to buy the new iteration. That’s what’s substantive. I’m hoping for you that Apple Inc. (NASDAQ:AAPL) opens down.
Bottom line: Apple Inc. (NASDAQ:AAPL)’s 9-cent decline in value is the only true move in a session dictated by larger macro forces that are most likely wrong by themselves but possibly right when taken together. The recent action? So rather than freaking out during Friday’s sell-off or just celebrating today, you could have just sat on your hands and spared yourself the agony and friction that comes with endless buying and selling.”
Apple Inc. (NASDAQ:AAPL) remains a strong investment choice due to its solid market position, growing services sector, and advancements in artificial intelligence (AI). Despite facing recent challenges like increased competition in China and a softer iPhone 15 cycle, Apple Inc. (NASDAQ:AAPL)’s future prospects look promising. The upcoming iPhone 16, which is expected to include advanced AI features, is likely to drive strong demand.
Additionally, Apple Inc. (NASDAQ:AAPL)’s Services division continues to grow, becoming a key part of its financial success. Apple Inc. (NASDAQ:AAPL) benefits from its large base of over 2 billion iOS devices, providing a steady revenue stream. New AI innovations are set to further boost growth. CEO Tim Cook’s strategy to address competition and focus on AI is crucial for Apple Inc. (NASDAQ:AAPL)’s expansion. Analyst Daniel Ives predicts a recovery in iPhone sales for fiscal year 2025 and highlights the potential of new AI features.
Even though Apple Inc. (NASDAQ:AAPL) recently saw a dip in stock price and a reduced stake by Warren Buffett, Berkshire Hathaway (NYSE:BRK-B)’s continued investment indicates confidence in Apple’s long-term outlook. Overall, Apple Inc. (NASDAQ:AAPL)’s loyal customer base and innovative AI efforts position it well for future growth.
Baron Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The Fund’s chief relative detractor was Apple Inc. (NASDAQ:AAPL), even though it was a meaningful contributor to absolute performance, as we added to our Apple position significantly during the period. We bought Apple well, but in 20/20 hindsight we didn’t buy enough. Because Apple has an oversized weight in the Benchmark (its average weight was 15.7% for the period), when Apple’s stock outperforms (it appreciated 23.0%), it has generally been a headwind to relative performance. Our Apple underweight accounted for 33% of our relative underperformance for the period.
This quarter we increased the size of our position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile… (Click here to read more)
Overall AAPL ranks 2nd on our list. While we acknowledge the potential of AAPL, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
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