In this article, we’ll explore Jim Cramer’s Latest Watchlist: 10 Stock Picks You Need to Know.

In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.

“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”

Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.

Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.

“Today, recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”

He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.

“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”

Our Methodology

This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.

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 Latest Watchlist: 10 Stock Picks You Need to Know

10. Eagle Materials Inc. (NYSE:EXP)

Number of Hedge Fund Investors: 28

Jim Cramer prefers Eagle Materials Inc. (NYSE:EXP) over Barrick Gold Corporation (NYSE:GOLD). He notes that Eagle Materials Inc. (NYSE:EXP) offers a dividend and has a stronger track record.

“Well, I like Eagle Materials, Inc. (NYSE:EXP) more, frankly. They’ve got a dividend and have had a better record than Barrick Gold Corporation (NYSE:GOLD). I just think it’s not six of one, half a dozen of another.  Eagle Materials, Inc. (NYSE:EXP)  has a demonstrably better growth portfolio and also better capital allocation.”

Eagle Materials Inc. (NYSE:EXP) is a strong investment choice due to its solid financial performance, focus on infrastructure and effective cost management. Eagle Materials Inc. (NYSE:EXP)’s cement segment, which supplies about 50% of its products for U.S. infrastructure projects, stands to benefit from ongoing investments in this area. Cement margins are expected to improve in fiscal 2025 as costs remain stable and prices rise. Although Eagle Materials Inc. (NYSE:EXP) recently reported a quarterly EPS of $3.76, which was below the expected $4.24, the company has a strong return on equity of 38.3% over the past year, showing its financial strength.

Eagle Materials Inc. (NYSE:EXP) has had some ups and downs, but analysts remain positive, with a price target of around $277, indicating a potential 30% increase. Additionally, Eagle Materials Inc. (NYSE:EXP)’s diverse product range, including Portland cement and gypsum wallboard, is in demand for both infrastructure and residential projects. Its commitment to sustainability, demonstrated by a partnership with Terra CO2 to create low-carbon materials, enhances its long-term growth prospects.

9. Hertz Global Holdings Inc. (NYSE:HTZ)

Number of Hedge Fund Investors: 38

Jim Cramer advises against investing in Hertz Global Holdings Inc. (NYSE:HTZ) at the moment, as he remains cautious about the stock. Hertz Global Holdings Inc. (NYSE:HTZ), known for its brands Hertz, Dollar, and Thrifty, is expanding its electric vehicle (EV) fleet through partnerships with Tesla Inc. (NASDAQ:TSLA) and Polestar Automotive (NASDAQ:PSNY). This shift not only aligns with sustainability trends but also meets growing consumer interest in EVs.

“The time to go in  Hertz Global Holdings Inc. (NYSE:HTZ) has not yet arrived. The stock still concerns me. Big Lots also has me worried—big concern.”

The recent surge in travel, as people return to both business and leisure trips, supports the potential for its long-term revenue growth. Although Hertz Global Holdings Inc. (NYSE:HTZ) has faced profitability challenges, with a negative net margin, its revenue growth is a positive sign. Hertz Global Holdings Inc. (NYSE:HTZ) is working on improving its cost structure and managing debt more effectively.

Despite some analysts lowering their price targets, Hertz Global Holdings Inc. (NYSE:HTZ)’s focus on modernizing its fleet and capitalizing on increased travel demand provides a strong foundation for future growth. If these efforts continue to progress and travel demand remains high, Hertz Global Holdings Inc. (NYSE:HTZ)  is well-positioned for long-term success, making it a compelling investment.