We recently compiled a list of the Jim Cramer’s Lightning Round: 9 Stocks in Spotlight. In this article, we are going to take a look at where PepsiCo, Inc. (NASDAQ:PEP) stands against the other stocks featured in Jim Cramer’s Lightning Round.
Jim Cramer, the host of Mad Money, recently discussed a market trend that’s been generating impressive gains, especially when investors target heavily shorted stocks. He explained the phenomenon as he said that investors find success by betting that these companies are in better shape than short sellers expect. According to Cramer, this approach has led to some significant wins in recent times. He pointed out the behavior of short sellers, noting that when things go wrong for them, they panic.
“The shorts always panic when their trades fall apart because, unlike longs, if you’re a short seller, you can lose a lot more than a hundred percent of your investment if the stock goes up too much.”
READ ALSO Jim Cramer on Nvidia Plus Other Stocks and Jim Cramer Recently Discussed These 7 Stocks
Cramer also highlighted that while short sellers can profit when a company fails, it’s a risky game with significant asymmetry. He explained that while a stock’s price can only fall to zero, it has the potential to rise indefinitely. Cramer cautioned that although short sellers might be hoping for a stock’s downfall, they are equally vulnerable to the nightmare scenario of infinite losses if the stock price continues to climb.
In such situations, when short sellers run out of options, they are forced to buy back shares, which can send the stock price even higher. For shareholders, this scenario can be advantageous. While short sellers may be a threat when predicting a stock’s decline, their need to buy back shares can act like rocket fuel for the stock’s price when good news emerges.
“If you’re a shareholder, they’re your worst enemy when they’re talking about a stock going to zero. But once the stock starts soaring on any good news, the shorts are your best friend because their forced buying is like rocket fuel and they can’t stop the propulsion while you just get to go along for the ride.”
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the recent episodes of Mad Money. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, 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 close up of a glass of a refreshing carbonated beverage illustrating the company’s different beverages.
PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 58
While Cramer acknowledged PepsiCo, Inc.’s (NASDAQ:PEP) CEO’s performance and the stock’s yield, he said it has become “too hard”.
“You know, I think Ramon Laguarta is doing such a good job but the odds are… If you have the Fed cutting rates, you shouldn’t own the stock. If you have the GLP-1s, you shouldn’t own the stock. If you have people saying that junk food is not good for you, you can’t own the stock and it’s just become just too darn hard. So even though it’s got a 3.5% yield, I do think it goes, unfortunately, I have to say it, I think it goes lower.”
PepsiCo (NASDAQ:PEP) is a global leader in the production, marketing, and distribution of a wide range of beverages and snack foods, offering products under popular brands like Lay’s, Gatorade, Pepsi, Doritos, Tropicana, and Aquafina. During CNBC’s Mad Dash, Cramer talked about the company and said:
“Well, PepsiCo has owned half of Sabra and for $500 million, they’re buying the other half. The reason why I mention this is because PepsiCo has been doing much to make its product lineup healthier. They’ve taken a lot of salt out, they’ve gone more natural colors and just as RFK Jr. is going after Fruit Loops, I think that Ramon Laguarta is positioning his portfolio to be able to say, look, we are doing what we can. And they added chips, by the way, for people who think that there’s not a lot of value. They’re fighting shrinkflation and I just think he’s being very forward. This acquisition shows me that not everybody is going in the wrong direction. So I just applaud this acquisition… But I guess it’s more of a metaphorical issue. I think that they’re doing what they can and that’s very smart. I told Ramon, you know, the stock is incredibly hard to own.”
On November 22, PepsiCo (NASDAQ:PEP) revealed that it had reached an agreement to acquire the remaining 50% stake in Sabra Dipping Company, LLC and PepsiCo-Strauss Fresh Dips & Spreads International GmbH, becoming the sole owner of both entities. These companies are responsible for producing Sabra and Obela products, which are known for their fresh dips.
Overall PEP ranks 2nd on our list of the stocks featured in Jim Cramer’s Lightning Round. While we acknowledge the potential of PEP 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 PEP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center