We recently compiled a list of the Jim Cramer Wants You to Check These 10 Stocks. In this article, we are going to take a look at where DexCom Inc. (NASDAQ:DXCM) stands against the Jim Cramer-approved stocks.
Jim Cramer noticed a strange pattern during the recent winning streak last week. According to Cramer, when a company reported earnings that were better than expected, its stock price would rise significantly. Even if the results were just a bit better than feared, the stock still went up. Conversely, if a company posted disappointing earnings, the market largely ignored it, believing it was just a temporary setback because the Fed might soon cut interest rates. This led to continued buying. However, this trend changed today as reality began to take hold.
“You see, we had a very odd pattern during the winning streak. It was a bit of Pangloss and a nip of Camelot. When a company reported a better-than-expected quarter, it was great. When a company reported a quarter that was just better than feared, the stock still rose. And when a company reported a bad quarter, we decided that it was the last bad quarter because the Fed was about to cut rates, so it was no big deal—buy anyway. In other words, companies could do no wrong, but not today. Today, we had a bit of a reckoning, a dose of reality.”
Jim Cramer pointed out that Tuesday’s market drop was anticipated because the S&P had been rising for eight straight days, and a ninth day would have been unusual, something not seen since 2004. The day was challenging, with the Dow falling 62 points and the S&P dropping 2%, which felt like a bigger loss. This raises concerns about whether the market can continue to rise, especially since negative news finally led to a decline after a strong eight-day rally.
“We were due for today’s modest pullback—the S&P had been up for eight straight days, and nine straight would have put us in rarefied territory. We haven’t seen that kind of winning streak since 2004. Today’s session was rough, with the Dow off by 62 points and the S&P dipping 2%, like losing 33%. We have to wonder if the market still has the momentum to go higher because today we got bad news, and guess what—stocks actually went down. That didn’t happen much during the 8-day gain.”
Jim Cramer observed that the market had been in a phase where strong performance drove stock prices up, and even poor results were overlooked because of the belief that the Fed would intervene. However, after seven days of gains, he suggested that this optimistic trend might be ending. The market has now reached a point where stocks no longer automatically benefit from positive bias.
“People had been reporting a perfect market scenario where good performance led to stock gains, and poor performance was cushioned by expectations that the Fed would step in to save the day. But after seven relentlessly positive days, we have to accept that stocks may no longer get the benefit of the doubt. We’ve reached a point where the market is sufficiently elevated, and we’re back to business as usual—where the good stocks rise, and the bad ones fall. At these high levels, we can’t just dismiss the bears with “heads I win, tails you lose.” There’s a return to rationality, and rationality is the enemy of a market where everything rallies indiscriminately.”
Cramer also mentioned that many investors are hoping for the Fed to step in during their meeting at Jackson Hole on Friday. If those expectations aren’t met, there could be significant selling pressure, particularly on a summer Friday. He noted that Lowe’s recently suffered because the market might be entering a phase where multiple rate cuts are necessary, but there’s no clear indication that such cuts are on the way. Without them, the company may struggle to turn its business around quickly.
“It doesn’t help that many expect the Fed cavalry to show up on Friday when they head to Jackson Hole. If things don’t go as expected, there could be a lot of selling, especially since it’s a summer Friday.”
Our Methodology
In this article, we analyzed a recent episode of Jim Cramer’s Mad Money and selected ten stocks he talked about. We also included information on how hedge funds feel about each stock and ranked them based on the number of hedge funds that own them, from the fewest to the most.
At Insider Monkey we are obsessed with 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 doctor demonstrating how to use the medical device to a patient with diabetes.
DexCom Inc. (NASDAQ:DXCM)
Number of Hegde Fund Investors: 64
Jim Cramer recently discussed DexCom Inc. (NASDAQ:DXCM), a company known for its blood sugar monitors for people with diabetes. DexCom Inc. (NASDAQ:DXCM) experienced a dramatic drop in its stock price earlier this year, falling from $111 to $64 in one of the toughest quarters Cramer has seen. Since then, DexCom Inc. (NASDAQ:DXCM) has been slowly recovering, reaching $77.
“One of the most dramatic declines of this year came from Dexcom, an old favorite of ours that we haven’t discussed in a while. It makes blood sugar monitors for people with diabetes. In the last week of July, the stock dropped from $111 to $64 in one of the most brutal quarters I have seen. Since then, Dexcom has been gradually recovering, inching its way back up to $77 last night. Then, bam—Eli Lilly releases a three-year study on its revolutionary GLP-1 drug, revealing it can prevent 94% of at-risk patients from developing type 2 diabetes.
I don’t want to diminish Lilly’s achievement, which will be discussed later, especially since GLP-1s are a big winner for the Chapel Trust. However, these results were in line with previous studies of the drug. Dexcom’s stock was hit hard, falling 6%, as GLP-1s are seen as a threat to the diabetes monitoring business, and today, the market reacted to that.”
In Q2 2024, DexCom Inc. (NASDAQ:DXCM) reported strong financial results, with earnings per share (EPS) of $0.43, surpassing the expected $0.39. While revenue was slightly below forecasts at $1 billion compared to $1.04 billion, DexCom Inc. (NASDAQ:DXCM)’s solid EPS highlights its profitability and growth potential. DexCom Inc. (NASDAQ:DXCM)’s ongoing advancements in continuous glucose monitoring (CGM) technology and its expanding presence in the healthcare market demonstrate its strength in a growing field.
Carillon Eagle Mid Cap Growth Fund stated the following regarding DexCom, Inc. (NASDAQ:DXCM) in its Q2 2024 investor letter:
DexCom, Inc. (NASDAQ:DXCM) is a medical device company that helped pioneer the design and development of continuous glucose monitoring systems (CGMs). They are primarily used by a large fraction of Type 1 diabetics and a meaningfully growing number of Type 2 diabetics to monitor their blood glucose levels. As such, we believe there is a huge greenfield opportunity as many individuals in the addressable market still rely on finger prick tests. Despite beating analysts’ estimates and raising guidance most quarters, the stock has taken a hit as the size of the beats and raises have lately become a bit constrained. Nevertheless, we continue to be supportive of the stock through new product introductions and the integration of its CGMs into tubed and tubeless insulin pump systems.”
Overall DXCM ranks 3rd on our list of the stocks Jim Cramer wants you to check out. While we acknowledge the potential of DXCM as an investment, 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 DXCM 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.