In this article, we discuss the 10 stocks that Jim Cramer says you should buy.
Jim Cramer, the former hedge fund manager and present journalist investor, has advised investors to “buy the dip” on companies that have posted market-beating earnings in the past few days but have still witnessed the share price decline as investors take stock of rising inflation and interest rates. During his Mad Money show aired by CNBC on May 2, Cramer stressed that investors should prioritize long-term outlook even if it meant “accepting some short-term losses”.
During his show, Cramer said that this was his eighth tightening cycle and from experience, he had concluded that if investors waited for the Federal Reserve to act against inflation, it might already be too late to buy stocks that were trading at huge discounts. He added that “you have to anticipate peak inflation” and if “you can’t take the pain, though, go ahead and swap into Treasurys now that they’re yielding near 3%”. He also highlighted that as interest rates rise rapidly, price-to-earnings multiples start shrinking.
Cramer Urges Investment in Great American Companies
The stock market is preparing for a series of interest rate hikes by the central bank through the year as inflation reaches new highs. Benchmark indexes like the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average are all trading at new lows as fears of a market slowdown due to an aggressive rate hike spook investors. David Katz, the chief investment officer at Matrix Asset Advisors, has also echoed Cramer’s comments, saying that the market is “overly worried” about a slowdown and investors should buy the dip in stocks.
Some of the stocks that Cramer is bullish on include Johnson & Johnson (NYSE:JNJ), The Goldman Sachs Group, Inc. (NYSE:GS), and The Coca-Cola Company (NYSE:KO). Cramer has termed these stocks “great American companies” and underlined that the drop in their share prices had nothing to do with these companies themselves but everything to do with interest rates. He noted that as inflation slowed, these stocks would automatically recover as well, paying handsome returns to those that had bet on them.
In late April, Cramer had forecast that inflation would peak in May and the market would go on a broad rally through June. The former hedge fund manager cited research from market technician Larry Williams in support. Cramer warned that a pullback in August was more than likely with stocks rebounding again towards the end of the summer season. The wild wings of the market in the past few days would seem to suggest that Cramer and the technical analyst have been spot on with their analysis.
Our Methodology
These were picked keeping in mind the latest calls that Cramer made on these equities on his Mad Money show aired by news platform CNBC.
An extensive database of around 900 elite hedge funds tracked by Insider Monkey was used to identify the popularity of each stock among hedge funds.
Jim Cramer Says You Should Buy These Stocks
10. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 14
AeroVironment, Inc. (NASDAQ:AVAV) provides robotics systems and related services. Cramer gave the stock a Buy recommendation during the Guest Interview segment of his show on May 2. In the segment, Cramer discussed the important role that the company was playing in the conflict in Ukraine by providing military drones to the Ukrainians. The parts shortages and supply chain issues affecting the production of these drones were also discussed. Wahid Nawab, the CEO of the robotics firm, participated in the segment.
On March 4, investment advisory Canaccord upgraded AeroVironment, Inc. stock to Buy from Hold and raised the price target to $85 from $64. Analyst Austin Moeller issued the ratings update.
At the end of the fourth quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $112 million in AeroVironment, Inc., compared to 15 the preceding quarter worth $134 million.
Just like Johnson & Johnson, The Goldman Sachs Group, Inc., and The Coca-Cola Company, AeroVironment, Inc. is one of the stocks that elite investors are flocking to.
9. Magna International Inc. (NYSE:MGA)
Number of Hedge Fund Holders: 28
Magna International Inc. (NYSE:MGA) markets auto parts and related equipment. Cramer underlined his bullish position on the stock during the Lightning Round segment of his show on May 2. According to the Mad Money Stock Screener, the journalist investor gave the stock a Buy rating during the segment while answering a query about the firm. Cramer has previously outlined his long-term outlook on the company and the potential it has as a mobility technology play during his show.
On May 2, RBC Capital analyst Joseph Spak kept an Outperform rating on Magna International Inc. stock but lowered the price target to $79 from $85, citing an earnings miss in the first quarter as the primary reason behind the ratings update.
At the end of the fourth quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $477 million in Magna International Inc., compared to 29 in the previous quarter worth $444 million.
8. Best Buy Co., Inc. (NYSE:BBY)
Number of Hedge Fund Holders: 29
Best Buy Co., Inc. (NYSE:BBY) retails technology products. The former hedge fund manager gave the stock a Buy recommendation during the Guest Interview segment of his show on May 2. Speaking with Corie Barry, the CEO of the company, Cramer discussed the prospects of the gaming industry now that virus restrictions were being lifted. Per Barry, the gaming engagement would continue “across platforms” even as people returned to in-person activities in the coming months.
On March 4, Jefferies analyst Jonathan Matuszewski maintained a Buy rating on Best Buy Co., Inc. stock and raised the price target to $140 from $137, appreciating the updated guidance numbers from the company at a recent investor update.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in Best Buy Co., Inc. with 1.3 million shares worth more than $132 million.
7. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 41
3M Company (NYSE:MMM) is a diversified technology company. Jim Cramer gave the stock a Buy recommendation during the Discussed Stock segment of his show on May 2, per the Mad Money Stock Screener. Cramer has been bullish on the company since the turn of the year, advising his viewers to stick with “great American companies” to weather the market swings. He said investors should target profitable companies with tangible products, reacting positively to the earnings of 3M Company.
On April 27, Credit Suisse analyst John Walsh kept a Neutral rating on 3M Company stock and lowered the price target to $161 from $173, noting that supply chain issues for the firm remained difficult.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company with 5.7 million shares worth more than $1 billion.
6. Edwards Lifesciences Corporation (NYSE:EW)
Number of Hedge Fund Holders: 45
Edwards Lifesciences Corporation (NYSE:EW) markets healthcare equipment. Cramer gave the stock a Buy recommendation during the Lightning Round section of his show on May 2. In response to a question about his views on the firm, Cramer outlined that he thought that investors should “buy more” of the stock. He also added that the company had done very well in this quarter.
On April 12, investment advisory Truist initiated coverage of Edwards Lifesciences Corporation stock with a Buy rating and a price target of $145. Analyst Richard Newitter issued the ratings update.
At the end of the fourth quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Edwards Lifesciences Corporation, compared to 43 in the preceding quarter worth $2.1 billion.
Along with Johnson & Johnson, The Goldman Sachs Group, Inc., and The Coca-Cola Company, Edwards Lifesciences Corporation is one of the stocks that hedge funds are buying.
In its Q4 2021 investor letter, Harding Loevner highlighted a few stocks and Edwards Lifesciences Corporation was one of them. Here is what the fund said:
“Innovation can foster growth in Health Care fields other than drug discovery. Edwards Lifesciences Corporation makes minimally invasive devices to treat heart disease or for critical care monitoring. Its transcatheter heart valve, SAPIEN, is the most-implanted aortic heart valve in the world. Having settled a lawsuit with Abbott over alleged patent infringement, Edwards Lifesciences Corporation is now moving ahead with a newer product line called PASCAL to treat elderly or frail patients—for whom currently available treatments are ineffective—for mitral and tricuspid disease. PASCAL is the fruit of the company’s ongoing investment in research and development. Between PASCAL and its next-generation SAPIEN valve, the company expects to double its addressable market to approximately US$20 billion by 2028.”
5. Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders: 56
Five9, Inc. (NASDAQ:FIVN) provides cloud software solutions. Jim Cramer gave the stock a Buy recommendation during the Guest Interview segment of his show on May 2. During the segment, Cramer discussed the potential of the stock in the artificial intelligence and virtual assistant space as traditional telephones became outdated and were replaced by modern virtual assistants. Five9 has already partnered with big tech players like Microsoft and Google in this regard to differentiate their products from the competition.
On April 29, Piper Sandler analyst James Fish kept an Overweight rating on Five9, Inc. stock and raised the price target to $169 from $163, noting the firm was a “franchise name to own with results providing further evidence of this”.
At the end of the fourth quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in Five9, Inc., compared to 76 in the preceding quarter worth $3.5 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Five9, Inc. was one of them. Here is what the fund said:
“Five9, Inc. is a cloud-based contact center as a service software provider that is replacing aging on-premise legacy solutions that dominate the installed base. Companies are being forced to modernize and cloud penetration is still low; Five9, Inc. is positioned to benefit and should see further growth driven by its cross-selling add-on modules and an AI product that generates high revenue.”
4. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 64
American Express Company (NYSE:AXP) provides payments solutions. Cramer was bullish on the company during his show on May 2 and gave it a Buy rating. He brought up the stock during the Discussed Stock segment of his show and underlined the recent earnings beat of the firm, noting that the stock had declined in value despite posting good results which was a “reflection of the current market and not the firm”.
On April 26, Citi analyst Arren Cyganovich kept a Neutral rating on American Express Company stock and raised the price target to $190 from $187, appreciating the strong earnings beat of the firm in the first quarter.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company with 15.7 million shares worth more than $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company was one of them. Here is what the fund said:
“In financials, American Express Company has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
3. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
The Coca-Cola Company makes and sells beverages. The journalist investor gave the company a Buy rating during the Discussed Stock segment of his show on May 2. He advised investors to “buy the dip” on some companies, including Coca-Cola, that were posting market-beating earnings but their stock had performed poorly since the market was “not willing to pay as much for those future earnings in this new environment”.
On April 26, Truist analyst Bill Chappell maintained a Buy rating on The Coca-Cola Company stock and raised the price target to $75 from $70, highlighting that the first quarter results of the firm were strong with 18% organic growth “well exceeding” expectations.
Among the hedge funds being tracked by Insider Monkey, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company with 400 million shares worth more than $23 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Coca-Cola Company was one of them. Here is what the fund said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (The Coca-Cola Company). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
2. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 75
The Goldman Sachs Group, Inc. provides a range of financial services. The former hedge fund manager gave the company a Buy rating during the Discussed Stock segment of his show on May 2, according to the Mad Money Stock Screener. As inflation rises and interest rates rise, Cramer has been urging viewers to buy up stakes in financial services firms that are likely to see earnings multiply overnight due to rising rates.
On April 18, BMO Capital analyst James Fotheringham kept an Outperform rating on The Goldman Sachs Group, Inc. stock with a price target of $486, appreciating the ongoing capital and funding optimization by the firm to improve profitability.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Eagle Capital Management is a leading shareholder in The Goldman Sachs Group, Inc. with 3.5 million shares worth more than $1.3 billion.
In its Q4 2021 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and The Goldman Sachs Group, Inc. was one of them. Here is what the fund said:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. The Goldman Sachs Group, Inc. jumped +47.59% for the year and +1.73% in the quarter.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson makes and sells healthcare products. Cramer was bullish on the stock during the Discussed Stock segment of his show on May 2, highlighting that the drop in the share prices of “great American firms” like Johnson & Johnson was an opportunity to buy. He added that once inflation is broken, investors will not have time to buy the shares at such great prices.
On April 20, Credit Suisse analyst Matt Miksic kept an Outperform rating on Johnson & Johnson stock and raised the price target to $205 from $200, noting the better-than-expected growth for the firm across key segments in the past few months.
At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson, compared to 88 in the previous quarter worth $6.8 billion.
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This article is originally published at Insider Monkey.
