We recently published a list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other stocks that Jim Cramer thinks deserve attention.
In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“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.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“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.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“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.”
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A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Jim Cramer noted that Apple Inc. (NASDAQ:AAPL)’s iPhone launch event starts at 1 p.m. ET on Monday. He questioned whether artificial intelligence still captures investor interest, especially in light of recent trading trends among AI-related stocks.
“Apple ’s iPhone launch event begins at 1 p.m. ET Monday. Does anyone care about artificial intelligence anymore? Seems fair to ask considering the recent trading in stocks lumped into the AI trade.”
A positive outlook on Apple Inc. (NASDAQ:AAPL) is backed by its strong financial performance and promising future. In the third quarter, Apple Inc. (NASDAQ:AAPL) reported impressive revenue of $85.8 billion, marking a 5% increase from the previous year despite foreign exchange issues. The Services segment saw record revenue of $24.2 billion, driven by more subscriptions and new services. Apple Inc. (NASDAQ:AAPL)’s profitability remains strong with a 46.3% gross margin and net income of $21.4 billion.
Although iPhone revenue slightly declined, other products like iPads and Macs performed well, with Mac sales boosted by new M3 devices and iPad sales rising 20% year-over-year. Apple Inc. (NASDAQ:AAPL)’s focus on emerging technologies, such as AI and augmented reality, especially with the upcoming Vision Pro AR headset, positions it well for future growth. Apple Inc. (NASDAQ:AAPL) also returned $32 billion to shareholders in Q3 2024 through dividends and share buybacks, reflecting confidence in its long-term financial health.
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.
Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing…” (Click here to read more)
Overall, AAPL ranks 1st on our list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. 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 is originally published at Insider Monkey.