We recently compiled a list titled Jim Cramer’s Ultimate Stock Picks: 10 Hot Stocks to Consider. In this article, we will look at where The Boeing Company (NYSE:BA) ranks among Jim Cramer’s 10 hot stocks to consider.
In a recent episode of Mad Money, Jim Cramer emphasized the unexpected strength in the market, pointing out that many companies are doing better than Wall Street realizes. He suggests that investors should stop second-guessing these companies every time negative news surfaces. Cramer praises the excellent management and execution by CEOs, which he feels often goes unappreciated.
“Suddenly, all is forgiven, or if not all, then at least most. I’m talking about the incredible resilience in this market, buoyed by a recognition that many companies are simply better than Wall Street gives them credit for. We need to stop turning against them every time there’s a seemingly bad data point. Every day I come to work, I’m dazzled by the resourcefulness of executives who do their best to create value for you, the shareholder. Lots of stocks went up on days like today when the Dow advanced 335 points, the S&P gained 75%, and the NASDAQ jumped 1.0%, all thanks to good management and excellent execution that often goes unnoticed.”
Jim Cramer acknowledges that while some CEOs might warrant skepticism, many are truly exceptional and deserve more recognition for their efforts. He criticizes the overemphasis on short-term economic indicators, arguing that great companies stay focused and aren’t thrown off by minor fluctuations.
“Listen, I’m not a pushover. I can hit CEOs with tough questions when needed, some of them deserve skepticism and scorn. But there are also plenty of brilliant, hardworking CEOs with incredible teams, and you ignore their hustle at your own peril. This often gets lost in the shuffle when we’re focused on the parlor game of guessing the Fed’s next move, a quarter point, half a point, quarter, half. You know what I say? Let’s get serious. Terrific companies don’t get caught up in that quarter-half shuffle.”
Cramer highlights Kroger CEO Rodney McMullen as an example of strong leadership. Despite facing challenges like opposition to its acquisition of Albertsons and a tough economic climate, McMullen has successfully managed to keep food costs down. Through strategies such as an effective loyalty program and improvements to regional stores, the company has performed well. After a strong earnings report, the stock rose more than 7%, reflecting a successful turnaround.
“CEO Rodney McMullen has managed to keep food costs down and deliver fantastic numbers, all while maintaining an expensive, unionized labor force in a very uncertain commodity environment. How? The company confounded critics by developing a superior loyalty program, regionalizing their stores, and creating some of the best private-label products out there, second only to Costco. Food is still expensive, but cooking at home is far cheaper than dining out. McMullen tells us that consumers are no longer flush with cash, especially his most budget-conscious clientele. He notes, “Budget-conscious customers are buying more at the beginning of the month to stock up on essentials, and as the month progresses, they become more cautious with their spending.”
Wow, that’s a tough environment! When I heard this, I thought back to the old company, the one that used to miss its numbers whenever the environment got a little tough. Everybody else remembers the old company too, which is why the stock was just sitting there waiting to be picked up, until this quarter’s report, after which it soared more than 7% in response to the fabulous results. Everyone thought the company would drop the ball, as they used to, but McMullen has finally whipped his supermarket into shape.”
In contrast, Cramer points out that the tech industry often suffers from misunderstandings due to its complex nature. He believes that Wall Street analysts frequently fail to appreciate the expertise and potential of tech CEOs who have a deep grasp of their businesses.
“We all need to eat, so it’s not hard to understand the grocery business. But it’s quite different when it comes to tech, where analysts constantly doubt the resolve and expertise of CEOs who simply know more about their businesses than the critics. In tech, the complexity often leads Wall Street to conclusions that have little to do with reality.”
Our Methodology
This article reviews a recent edition of Jim Cramer’s Morning Thoughts, where he covered different stocks. We have selected and analyzed the ten most notable companies mentioned, ranking them according to how much they are owned by hedge funds, from the least owned to the most owned.
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 commercial jetliner parked at an airport, reflecting the companies success in aviation.
The Boeing Company (NYSE:BA)
Number of Hedge Fund Investors: 42
Jim Cramer points out that The Boeing Company (NYSE:BA)’s shares are facing challenges after unionized workers in the Pacific Northwest voted strongly against a proposed contract. The potential strike by machinists could be expensive for The Boeing Company (NYSE:BA) and might push the company to raise additional capital. Cramer has expressed concerns about The Boeing Company (NYSE:BA)’s free cash flow situation.
“Boeing shares are under pressure after unionized factory workers in the Pacific Northwest overwhelmingly voted against a tentative contract. The machinists’ strike may prove costly and could be the last straw for Boeing needing to raise capital. I’ve been worried about Boeing’s free cash flow outlook.”
The Boeing Company (NYSE:BA)’s positive investment outlook is supported by its gradual recovery, growing demand for its commercial aircraft, and expected improvements in free cash flow (FCF). Despite supply chain issues, The Boeing Company (NYSE:BA) has seen rising demand for key models like the 737 MAX and 787. Deliveries of the 737 MAX are projected to increase from about 380 in 2023 to 535 in 2024, to reach 600 deliveries in the future. This strong demand is likely to boost revenue and expand The Boeing Company (NYSE:BA)’s market share.
The Boeing Company (NYSE:BA)’s free cash flow is also expected to improve significantly. The 737 MAX and 787 are anticipated to contribute $2.8 billion and $1.7 billion to FCF by 2025, respectively, providing financial flexibility for managing debt and funding growth. Although The Boeing Company (NYSE:BA) reported a GAAP loss per share of $2.33 in Q2 2024, its Global Services segment saw a 5% increase in revenue year-over-year, showing the company’s resilience.
Analysts are optimistic, with RBC upgrading the stock to “Outperform” and raising the target price to $275, indicating confidence in The Boeing Company (NYSE:BA)’s recovery and future potential. Despite some short-term challenges, The Boeing Company (NYSE:BA)’s improving production rates, strong demand, and significant free cash flow make it an attractive long-term investment.
Overall BA ranks 7th on our list of Jim Cramer’s ultimate stock picks. While we acknowledge the potential of BA 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 BA 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 on Insider Monkey.
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