In this article, we’ll explore the 10 Stock Picks That Could Change Your Investment Game According to Jim Cramer.
Tech Stocks Shine When Rates Are High but Struggle After Rate Cuts, Says Cramer
In a recent episode of Mad Money, Jim Cramer points out that tech stocks often perform well when the Federal Reserve maintains high interest rates and the economy slows down. However, when the Fed cuts rates, as it did recently, Wall Street shifts its focus to companies that can show significant earnings growth due to these lower rates. This may seem confusing, but in the stock market, cash is limited, and it’s currently flowing into companies that would struggle without the rate cuts. While many stocks initially rose after the cut, they couldn’t maintain those gains, leading to a market decline.
“The thing is, these tech stocks tend to be winners when the Fed keeps rates high and the economy slows. But when the Fed slams on the accelerator, as it did today, Wall Street bands together and piles into the companies that can post big earnings gains with much lower interest rates. Now, that may sound strange to you. Obviously, the real world makes no distinction between a company that does well all the time and one that does extremely well some of the time.
However, in the crazy world of the stock market, we only have so much cash to go around, and right now, it’s flowing into companies that would have been doomed in a world where the Fed didn’t start cutting rates. These companies have stocks that are much prized right now, so the money funnels into them. Everything else went up but couldn’t stay up after the rate cut. These did stay up; unfortunately, there aren’t enough of them to allow the averages to close in the black. That’s why we close in the red.”
Cramer questions whether all tech stocks are now weaker and suggests that not every company will suffer the same fate. He believes there are still standout stocks in the tech sector that can thrive regardless of economic conditions, even if they don’t perform well on days when the market dips. These companies help larger businesses operate more efficiently, and there’s always a demand for that kind of support, indicating that some tech players will continue to shine.
“So, is every player doomed to the same small part? Are the stocks of all tech companies weaker now? Can nothing transcend that status? Like when I went out for Bye Bye Birdie or Guys and Dolls in high school, I mean, first, no publicly traded company would ever be that low. I was totally expendable, other than as Lieutenant Rooney in ARS Gold Lace, where I don’t think I ever spoke more than a few words.
But there will be stocks that shine even in tech with rates coming down. However, we come out here to find legitimate stars that can thrive regardless of the economy, and they don’t do that well on days like today. Many of these outfits are about helping big companies do more with less, and there’s always demand for that. They’re not big players; you bring in these guys to bridge the gap and perform better with fewer people.”
Jim Cramer: Artificial Intelligence (AI) Drives Profit Growth Despite Slowing Sales
Jim Cramer also highlights that artificial intelligence is a crucial factor in today’s market. Companies using AI can enhance their profit margins, increasing earnings even amid declining sales. This indicates that AI can drive profitability without needing to boost sales.
Our Methodology
This article summarizes Jim Cramer’s latest Mad Money episode, in which he analyzed several stocks. We selected 12 companies and ranked them by their ownership levels among hedge funds, beginning with those that are least owned and moving to those that are 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).
Jim Cramer’s 10 Stock Picks That Could Change Your Investment Game
10. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Investors: 24
Jim Cramer expressed his views on Iron Mountain Incorporated (NYSE:IRM), stating that he was fond of the stock when it had yields of 5%, 4%, and 3%. However, he noted that with the yield now at 2.5%, he no longer feels as positive about it because Iron Mountain Incorporated (NYSE:IRM) has risen significantly, by 66%. Cramer suggested it’s time to look for other opportunities.
“Okay, I think Iron Mountain, which I liked when it had a 5% yield, when it had a 4% yield, and when it had a 3% yield, was good. Now, at 2.5%, I don’t like it as much; it’s had too big a move up—66%. Let’s move on.”
Iron Mountain Incorporated (NYSE:IRM) has a strong positive outlook, backed by its impressive Q2 2024 earnings, which exceeded analysts’ expectations due to significant revenue growth from increased demand for its storage and information management services. Iron Mountain Incorporated (NYSE:IRM)’s expansion into data center services is particularly promising, as businesses increasingly need secure storage solutions during their digital transformation.
Iron Mountain Incorporated (NYSE:IRM) is also diversifying beyond traditional storage by adding services like data management, IT asset disposition, and secure shredding. This broadens its revenue sources and reduces reliance on any one market. Recent strategic acquisitions have strengthened Iron Mountain Incorporated (NYSE:IRM) capabilities and expanded its customer base, creating synergies that should drive future growth.
Additionally, Iron Mountain Incorporated (NYSE:IRM)’s commitment to sustainability, through initiatives aimed at lowering its carbon footprint, enhances its reputation and aligns with the growing demand for environmentally responsible practices. Recent announcements about international market expansions and improved service offerings have positively impacted investor sentiment, reinforcing a strong outlook for Iron Mountain Incorporated (NYSE:IRM).
9. Walgreens Boots Alliance Inc. (NYSE:WBA)
Number of Hedge Fund Investors: 35
Jim Cramer also discussed Walgreens Boots Alliance Inc. (NYSE:WBA) in a recent segment of Mad Money, noting its limited downside potential. He pointed out that the stock can only drop by nine points, emphasizing that it won’t fall below zero. Cramer expressed hope for Walgreens Boots Alliance Inc. (NYSE:WBA)’s success, but highlighted the need for strategic spending. He suggested that Walgreens should invest in artificial intelligence to reduce costs and increase profits, following the innovative practices seen in other businesses.
“The great thing about Walgreens is it can only go down nine points. I know that’s kind of a subtle jab! Hey listen, it won’t go down 10—stocks stop at zero. I sure hope he pulls it off, but he’s got to start spending money in the way that we heard people do things out here—using artificial intelligence to cut some overhead and bring home more profit.”
Walgreens Boots Alliance Inc. (NYSE:WBA) has a strong positive outlook following its Q2 2024 earnings report, which showed better-than-expected performance with growth in both revenue and net income. Walgreens Boots Alliance Inc. (NYSE:WBA)’s strategic move into healthcare, including partnerships with providers and an increase in primary care services, positions it well to meet the growing demand for accessible healthcare.
Additionally, Walgreens Boots Alliance Inc. (NYSE:WBA) is speeding up its digital transformation by enhancing online pharmacy services and delivery options, which improves customer engagement and sales. Cost-saving initiatives aimed at boosting profit margins also strengthen its financial outlook. As a key player in the pharmacy and healthcare sectors, Walgreens Boots Alliance Inc. (NYSE:WBA) benefits from a wide network of stores, giving it a competitive edge in a changing market. Recent partnerships in telehealth have further improved market sentiment, providing a solid foundation for future growth.
Ariel Appreciation Fund stated the following regarding Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q2 2024 investor letter:
“Alternatively, shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), underperformed following an earnings miss and significant reduction to full year guidance, largely due to continued weakness in its U.S. retail business. In response, management announced a multi-year plan for the U.S. business to reduce the retail footprint, invest in the customer experience, align the retail and healthcare businesses for enhanced go-to-market capabilities and simplify the healthcare portfolio.
Meanwhile, the company continues to execute on its cost savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium-term, we expect a re-rating in shares as WBA’s new CEO rebuilds the leadership team and earns credibility by executing on previously articulated strategic imperatives as well as margin.”
Hedge Fund Resource Center