Jim Cramer, the host of Mad Money, recently discussed some of the week’s important market events, focusing on earnings reports from different companies, including major banks and new data from the Labor Department.
Cramer expressed hope that the wildfire situation would bring some positive news. He acknowledged the challenges natural disasters bring, but pointed out that government and insurance companies are working to stabilize the situation. While Cramer made it clear that he doesn’t support exploiting tragedy for profit, he also noted that some retailers tend to benefit during such times as people begin rebuilding.
He mentioned that while some of these stocks have already seen gains, there may still be room for growth, especially as insurance payouts and government funds flow toward reconstruction efforts.
“How about the other side of the trade? Here I’m talking about earnings. Can great earnings triumph over a sour bond market? We’re going to find out for certain because this is a week we associate with bank earnings and there’s a lot of misconceptions about the banks. We know that when they make the wrong bets on the bond market, like two years ago, their stocks can take some real nasty hits. But when their bond portfolios are good, like they are today, they can withstand or even profit from higher rates so let’s not write these stocks off.”
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Regarding the JPMorgan Healthcare Conference, Cramer noted that this is a major event where nearly every drug and healthcare company presents updates. He expects some exciting developments, despite current economic conditions. However, he cautioned that drug stocks are still highly sensitive to interest rates, which, in many cases, are more influential than even a company’s pipeline or earnings. Cramer discussed the Producer Price Index (PPI) and the Consumer Price Index (CPI), which are scheduled for release on Tuesday.
“It needs to come in cooler if there’s any hope that interest rates could reverse and the Fed can regain some of its lost credibility, stemming from cutting in a hurry when we now know there was no need to do so. I think it’s possible that these numbers are gonna be cooler than the labor report, but not enough to justify our appeal of today’s losses.”
Wednesday’s market action would bring more attention to bank earnings, Cramer explained, noting that banks would likely receive an initial boost from higher interest rates, particularly through products like certificates of deposit, which offer lower rates than what banks can earn by investing in the bond market. While this provides a short-term benefit, it could make these stocks worth holding in the interim.
“Bottom line: If you’re a bull or at least trying to make sense of this market, well, you know a market that goes down on seemingly good news, all I can say is that the stock market that gets surprised may seem like it’s reacting inappropriately until you see its master, the bond market, explain everything by the direction of interest rates. For now, that’s the key determinant of the entire stock market, even as there are pockets of positivity that can escape the bond market’s tyranny.”
Jim Cramer’s Game Plan: 12 Stocks in Focus This Week
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 10. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in 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 Game Plan: 12 Stocks in Focus This Week
12. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 65
Cramer mentioned that while Schlumberger Limited (NYSE:SLB) stock has been down for a few quarters, it might report something good in its fourth quarter and full-year earnings report on Friday.
“Finally on Friday, I’m watching out for SLB. That’s the old Schlumberger, they don’t call it that anymore. As we’ve seen a few weeks of rising oil prices, I know that’s not enough to turn around SLB’s fortunes, it’s been down in the dumps for a year and four months. A few weeks of good oil news won’t change that, but I think that the company might give us a more positive forecast given that there’s certainly more drilling optimism around even as SLB’s a very international company.”
Schlumberger (NYSE:SLB), a leader in areas such as carbon management and energy systems integration, addresses various elements of the global energy landscape. The company has reported an adjusted EBITDA of $6.687 billion for the first nine months of 2024, an increase from $5.830 billion in the same period of 2023. Its adjusted EBITDA margin also improved, reaching 24.8% for the first nine months of 2024, up from 24.1% in 2023.
The company expects ongoing margin expansion to drive full-year adjusted EBITDA margins of 25% or higher for 2024. The company’s strong cash flow, coupled with the sale of its Palliser asset in Canada, is expected to support greater returns to shareholders.
Schlumberger (NYSE:SLB) CEO, Olivier Le Peuch, addressed the challenges facing the commodity market, including oversupply, reduced demand, and slower economic growth, particularly in regions like China, the U.S., and Europe. Despite these pressures, the company maintains confidence in the long-term outlook for the oil and gas industry. However, the company does not foresee a near-term recovery in North American activity. Schlumberger sees a modest increase in upstream spending in international markets in 2025 while spending in North America is expected to remain flat or decline slightly.
11. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)
Number of Hedge Fund Holders: 39
J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is one of Cramer’s favorite companies and he called it a “barometer of business”.
“After the close, we get results from one of my favorite companies, J.B. Hunt, it’s the giant trucker. I see this company as more of a barometer of business because it does such a tremendous job of breaking down the strong and weak parts of the economy line by line by line.
These days the transports everyone wants though are the airlines. Just look at the positive reaction to Delta’s numbers this morning. I think we need to keep in mind that when you get really strong earnings like the ones from Delta, they can indeed transcend the market’s negative gravitational pull. [The] stock looked good today, finished up 9%.”
J.B. Hunt (NASDAQ:JBHT) offers a variety of transportation, delivery, and logistics solutions, utilizing a range of company-owned equipment and services. In its third-quarter earnings call, management discussed the challenges the company has faced in the freight environment, highlighting its ongoing focus on controlling costs. While dealing with these challenges, the company has made considerable strides in right-sizing its cost structure to better adapt to the current market conditions.
On January 10, Raymond James increased its price target on the stock to $200 from $195, maintaining an Outperform rating on the stock. The transportation sector faced challenges in 2024, driven by continued earnings revisions from 2023, evolving port dynamics, and uncertainty surrounding the election, which affected various modes of transportation. While many of these issues have been resolved heading into 2025, election-related concerns, particularly regarding potential tariffs, are still a key focus.
The firm cautions that the imposition of tariffs could hinder the freight market’s recovery. Furthermore, J.B. Hunt (NASDAQ:JBHT) has adjusted its expectations for net capital expenditures in 2024 to about $625 million, a decrease from its earlier forecast of $650 million to $700 million.