We recently compiled a list of the Jim Cramer Discussed These 11 Stocks Recently. In this article, we are going to take a look at where Enphase Energy, Inc. (NASDAQ:ENPH) stands against the other stocks.
Jim Cramer, the host of Mad Money, cautioned viewers on Wednesday about the risks of blindly following the crowd in the stock market. He emphasized that it is essential to avoid expecting the same outcome as everyone else, as there is a significant chance things will not play out as expected. This, he explained, is because many expectations are often already “priced in” to the market.
“… And that’s why you need to be extra wary of the IPO cycle. Let’s go over this. We’ve seen the pattern over and over again. We get this deluge of new deals, at first, many of them explode higher, but at the same time they’re flooding the market with new stock supply and that supply ultimately drags us down. I’ve said it a million times, the stock market is like any other market. It’s all about supply and demand.”
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When supply increases too rapidly, prices are likely to fall. He stressed that the enthusiasm surrounding IPOs, particularly when they make early investors substantial profits, creates an environment of palpable excitement. Cramer noted that when interest in these IPOs wanes, that initial exuberance quickly turns to frustration, which can cause broader market declines, not just in IPOs but across the board.
Such a cycle, Cramer noted, is nothing new. He pointed to 2020 and 2021 as prime examples of how a flood of IPOs and SPAC mergers, fueled by stimulus checks, led many people to invest in trendy stocks. He added:
“2020, we also had a ton of electric vehicle and charging station-related IPOs and SPAC mergers. At first, these stocks were unstoppable, although most of that was because this was a period of high-risk speculation where people were willing to give anything with the right buzzwords.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 12. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A solar panel array stretched across a large open field, its glimmering panels reflecting the sun.
Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 38
Cramer, while discussing people’s tendency to stick to their investment thesis because of confirmation bias, explained how solar stocks like Enphase Energy, Inc. (NASDAQ:ENPH) rose for 2 years but suffered when the public realized their cost and the interest rate environment.
“The residential solar stocks soared in 2020 and 2021 and kept running into 2022 even when most growth plays were getting pulverized. If you owned it, maybe you thought you were winning because people were embracing renewable energy and the government was subsidizing it heavily. But in 2023, the residential solar stocks, they, they got obliterated. Why?
Do you know that it had nothing to do with the popularity of renewable energy and it couldn’t be stopped by generous federal subsidies? Instead, it turned out that people can’t really afford residential solar systems without borrowing money. Meaning the whole industry was actually built not on solar but on financing. And once people realized long-term interest rates would remain elevated for quite some time, the residential solar stocks, they all got crushed. It’s not a coincidence, something like Enphase was roaring in 2020 and 2021 when people could borrow money for next to nothing.”
Enphase (NASDAQ:ENPH) is a company specializing in the design, development, production, and sale of energy solutions, with a focus on the solar photovoltaic industry.
Overall ENPH ranks 7th on our list of the stocks Jim Cramer discussed recently. While we acknowledge the potential of ENPH 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 timeframe. If you are looking for an AI stock that is more promising than ENPH 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 at Insider Monkey.