We recently compiled a list of the 8 Stocks on Jim Cramer’s Radar. In this article, we are going to take a look at where Thermo Fisher Scientific Inc. (NYSE:TMO) stands against the other stocks.
Jim Cramer, the host of Mad Money, recently shared some investment guidelines based on his 40 years of experience. As we previously discussed in our article, Jim Cramer Talked About These 8 Stocks, Cramer emphasized that both bulls and bears can profit, but greed leads to losses, advising investors to take profits and avoid being overly greedy. His second rule is that paying taxes is acceptable. Finally, Cramer stressed the importance of not making large, all-at-once buys or sales, recommending gradual adjustments to positions instead.
In addition to these guidelines, Cramer’s next rule was to recognize the importance of distinguishing between damaged stocks and damaged companies. He explained that buying stocks from companies that are fundamentally flawed is a mistake with no chance of recovery, but stocks of companies that are simply experiencing temporary issues may present a buying opportunity. This distinction is critical because, as Cramer pointed out, there’s no “money-back guarantee” when buying into a company with long-term problems.
Investors should focus on finding stocks that are down for reasons that aren’t related to poor company fundamentals. Cramer then moved on to his next rule, which is to always do the relevant homework.
“If you want to build a portfolio of individual stocks, that’s a big if since there’s nothing wrong with getting all of your equity exposure from a cheap index fund that mirrors the S&P 500, well, you gotta be rigorous about it. Which brings me to my next rule: Do the homework.”
READ ALSO Jim Cramer’s Latest Lightning Round: 8 Stocks in Focus and Jim Cramer Discussed These 11 Restaurants and Retail Stocks
Cramer said that doing the homework means more than just picking stocks based on a gut feeling; it involves actively researching companies by listening to earnings calls, reading research reports, and staying on top of the news. Cramer noted that some investors dismiss this kind of work, seeing it as unnecessary or outdated in today’s fast-paced world. However, he was clear in his belief that failing to do proper research before buying stocks is foolish and can lead to poor investment choices.
Cramer further emphasized that doing homework today is easier than ever. With so much information available on the internet, there’s no excuse for not gathering as much data as possible. For those who don’t have the time or inclination to dive deep into individual stocks, Cramer suggested that index funds are a great alternative. Another crucial rule that Cramer continually stresses is the importance of diversification.
“The next rule is another essential that I harp on constantly: Diversify, diversify, and diversify. Always be diversified, that controls risk, and managing risk is really the holy grail of this business. What’s the biggest risk out there? It’s called sector risk.”
Sector risk refers to the potential for a specific sector of the economy to lag, which can result in negative impacts on investments within that sector. Cramer explained that sector risk is one of the most significant dangers to an investment portfolio, and diversification is the only way to protect against it.
He frequently says that “diversification is the only free lunch in this business” because it’s the one investment principle that benefits everyone. As per Cramer, by mixing different sectors in a portfolio, at least five according to him, investors can prevent themselves from suffering catastrophic losses if one particular sector takes a hit.
“Here’s the bottom line: Whether you’re an amateur or professional, you always need to do your homework and keep your portfolio diversified. This is the kind of routine maintenance that protects you from monster losses down the line. Remember, if you can keep your losses to a minimum and let your gains run, you almost always come out ahead. But don’t try to rationalize those losses because stocks don’t always come back to even or anywhere near that.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the 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 workstation in a research lab stocked with laboratory products and services.
Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 98
Talking about life sciences equipment and solutions provider, Thermo Fisher Scientific Inc. (NYSE:TMO), Cramer said:
“They make big ticket equipment that these companies need to conduct research, but most of the revenues come from consumables and services for these customers. Regular viewers know that I liked Thermo Fisher for a very long time. It’s been a fabulous performer over the last decade, but it’s struggled ever since the stock peaked at the end of 2021, pulled back hard in 2022…
Now some of this was due to tougher comparisons as Thermo Fisher did great business in 2020 and 2021 as drug companies spent fortunes trying to figure out how to fight Covid. Afterwards, there was an industry-wide inventory glut of their machines because you only need so many in resource labs. Plus, it doesn’t help that we haven’t had many biotech IPOs over the past three years. Normally when biotechs come public, they use the proceeds to buy equipment and materials from companies like Thermo Fisher.”
Cramer noted that while the stock showed improvement in 2023, it fell sharply after a mixed earnings report in October, which included weaker-than-expected revenue and soft guidance for the fourth quarter. He said that the selling continued, exacerbated by a broader healthcare sector decline. However, the one thing that halted the decline was when the company announced a $4 billion buyback program in mid-November, and in early December, revealed that it had already bought back $1 billion of stock.
“I think things will gradually improve for Thermo Fisher with business picking up in 2025 and 2026 and hey, if the IPO market ever comes back to life, there’ll be a new wave of biotech companies coming public and spending their money on life science equipment. Doesn’t hurt that Thermo Fisher now only trades at 22 times next year’s estimate. That’s very low because this is a 30 multiple stock over many years.”
For the third quarter, Thermo Fisher (NYSE:TMO) reported adjusted EPS of $5.28, a decrease from $5.69 in the same period last year, though slightly exceeding expectations. Revenue increased marginally to $10.60 billion, falling short of consensus estimates. The company raised its full-year adjusted EPS guidance to a range of $21.35 to $22.07, up from its previous forecast of $21.29 to $22.07. It also confirmed its revenue guidance of $42.4 billion to $43.3 billion.
Overall TMO ranks 1st on our list of stocks on Jim Cramer’s radar. While we acknowledge the potential of TMO 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 TMO 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.