We recently published an article titled Jim Cramer Thoughts on 8 Stocks As He Discussed Market Froth. In this article, we are going to take a look at where Constellation Energy Corporation (NASDAQ:CEG) stands against the other stocks.
Jim Cramer, the host of Mad Money, discussed how “froth” is currently affecting the market, explaining that trend-driven stocks need to experience a decline before more stable stocks can begin to recover.
“The fad stocks, they need to go down before non-fad stocks can triumph. That’s what’s happening. It’s just a fact of life in this business.”
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After a rough week marked by a significant downturn in trendy stocks, Cramer pointed out that it is a rare positive sign in an otherwise negative environment that the trend seems to be running its course. Cramer reflected on the market’s performance, mentioning that the Dow managed to inch up by 33 points, while the S&P 500 fell by 0.5%. However, the Nasdaq dropped by 1.21%, turning negative for the year.
He also stressed that the decline primarily occurred toward the end of the trading day, which he found unusual and concerning, though he was not sure about the specific cause of the abrupt drop. “It was pronounced, it was nasty,” Cramer remarked, highlighting the sharpness of the downturn.
“Now, nobody wants anybody to lose money, including me, but there’s a thing called froth, and we gotta talk about it as froth is the enemy of prudence. Smart investing requires a degree of prudence, something that’s highly incompatible with froth.”
He explained that smart investment strategies require a certain degree of caution, which frothy market conditions cannot support. He pointed out that for a period, the market had been filled with froth but lacked prudence, especially evident during the turbulent trading seen late last week. However, Cramer noted that as the froth subsides, investors are turning to assets with more durability and longevity. He specifically mentioned that drug stocks have been performing well recently.
“So here’s the bottom line: Once these frothy momentum stocks come in enough, then we will finally be in a much more straightforward world, a world where what tends to rally is not the sizzle, but the steak.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 24. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close up of a wind turbine producing electricity as the sun sets.
Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 85
Discussing the impact of Microsoft’s decision to cut its capital expenditures for data centers on companies like Constellation Energy Corporation (NASDAQ:CEG), Cramer said:
“How about the walloping in the nuclear power utilities like Vistra and Constellation Energy? These stocks are on a rollercoaster and right now they’re on the downside. They, they trade like they weren’t even wearing their seat belts when you’re going down, which is what you know what happens. You fly up and then you land on your head. Microsoft had a hand in the froth here too, except this time at least it was negative. See these momentum utility stocks, all data center plays won’t be as important if Microsoft’s actually cutting capital expenditures for data centers, which is also what we heard on Friday. Why the heck do we need to bid up the stocks of tangential utilities when maybe we don’t even need to worry about the regular utilities? Maybe they got enough power, of, of course, we don’t need Constellation or Vistra.”
Constellation Energy Corporation (NASDAQ:CEG) is an energy provider engaged in generating and distributing electricity from diverse sources, including nuclear, wind, solar, natural gas, and hydroelectric power.
Overall CEG ranks 2nd on our list of the stocks Jim Cramer recently discussed. While we acknowledge the potential of CEG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CEG 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.