Jim Cramer Says You Should Stay Away from These 5 Stocks

3. Crocs Inc (NASDAQ:CROX)

Number of Hedge Fund Investors: 41

Jim Cramer has been skeptical and hesitant about Crocs Inc (NASDAQ:CROX) but recently recommended investors to avoid investing in Crocs Inc (NASDAQ:CROX).

When asked about the American footwear company Crocs Inc (NASDAQ:CROX) shares, Cramer said:

“No, too dicey.”

A few months back Cramer had said that he “likes” Crocs Inc (NASDAQ:CROX) but was worried about the “fad” aspect.

As of the end of the third quarter of 2023, 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Crocs Inc (NASDAQ:CROX). The most notable stakeholder of Crocs Inc (NASDAQ:CROX) during this period was Paul Marshall and Ian Wace’s Marshall Wace LLP which owns a $247 million stake in Crocs Inc (NASDAQ:CROX).

Patient Capital Management stated the following regarding Crocs, Inc. (NASDAQ:CROX) in its fourth quarter 2023 investor letter:

“This quarter we entered four new positions, while exiting four positions. Our largest new position was Crocs, Inc. (NASDAQ:CROX). Crocs is a well-known consumer brand in the footwear industry. Despite continual calls over the years as a fad, Crocs has shown impressive growth and staying power. Since 2017 the company has increased sales at a 20%compound annual growth rate (CAGR) while maintaining industry leading operating margins of 27%. The stock sold off recently as the HEYDUDE brand it purchased in 2022 faced challenges. A combination of market oversaturation, and still limited brand awareness has made HEYDUDE a drag on the overall business. This is more than priced in at current levels with the stock trading at a P/E of 8.5x below peers at 14.3x and their historical average of 15x since 2019. The company is making progress on fixing HEYDUDE with growth expected to return in the 2H24. Overall, we view the child piece of the core Crocs product as a consumer staple and believe people are underappreciating its staying power as well as the ongoing improvements in the HEYDUDE brand. We believe you can buy a high-quality company, at a low multiple, with top FCF yield (13%) that is committed to both debt paydown and buybacks.”