On Tuesday, Jim Cramer, host of Mad Money, shared his thoughts on the current state of the market, especially about AI stocks. He noted that despite the enthusiasm surrounding AI, investors are no longer willing to pay high prices for stocks tied to this technology. Cramer explained that on days like Tuesday, people in the market are feeling what he referred to as “painful shrinkage.”

“In this business, shrinkage means paying less for the same earnings that you were willing to pay up for only just a week or two ago.”

READ ALSO: 7 Stocks on Jim Cramer’s Radar and Jim Cramer Put These 10 Stocks Under the Spotlight

He pointed out that this phenomenon is commonly known as price-to-earnings multiple compression, a widespread trend across the market. Cramer asked why this is happening, especially when it seems like nothing has changed with the companies themselves. He explained:

“Look, when everyone’s terrified that a piano’s about to fall on their heads, they don’t want to get hit by the baby grand and right now they don’t want to own the falling stocks either. So they sell but they can’t get a good price anymore because too many people want out for the same reasons. They think that stocks are overpriced versus when we consider what could lay ahead.”

Cramer further elaborated that there is a strong sense of apprehension in the market right now, with investors bracing for potential economic challenges. Despite good news that may come out about companies or the economy, people are reluctant to hold onto stocks because they are anticipating weakness down the road.

He said that even though they cannot see it clearly, the ongoing concerns about the economy and the administration’s messaging about necessary economic adjustments create a climate of fear. As Cramer put it, “If the administration keeps talking about how we’re transitioning, how the economy needs to make some painful adjustments, then any big rally that we had Friday and yesterday will become magnets for sellers.”

“Here’s the bottom line: This latest round of multiple compression came on a day of wonderment about artificial intelligence, and even with Jensen’s fabulous speech, multiple compression was just much more powerful. You know what? It’s going to stay that way until we get through this environment, either because the White House backs off, or because stocks come down to the point where we simply get used to it.”

Our Methodology

For this article, we compiled a list of 5 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on March 18. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Jim Cramer’s Thoughts on These 5 Stocks

5. Steel Dynamics, Inc. (NASDAQ:STLD)

Number of Hedge Fund Holders: 45

During the lightning round, a caller inquired about Steel Dynamics, Inc. (NASDAQ:STLD), and in response, Cramer said:

“I think Steel Dynamics is going to be a winner under President Trump’s tariffs against the companies that are subsidized by the Japanese and the Chinese and I totally support them on this. And I think you should buy, buy, buy Steel Dynamics.”

Steel Dynamics (NASDAQ:STLD) is a steel producer and metal recycler that manufactures a range of steel products, including hot-rolled, cold-rolled, and coated steel, as well as nonferrous metals and aluminum products. The company also provides scrap metal processing, transportation, and steel fabrication for non-residential buildings.

It is worth noting that in 2023, when Cramer was asked about Steel Dynamics (NASDAQ:STLD), he stated, “It is an excellent company.” Since then, STLD stock has seen a meager gain of over 3%.

4. The TJX Companies, Inc. (NYSE:TJX)

Number of Hedge Fund Holders: 74

The TJX Companies, Inc. (NYSE:TJX) was mentioned during the episode, and here’s what Cramer had to say about the company:

“I love T.J. Maxx. I mean, come on. I bought some this week for the Charitable Trust. I think it’s terrific. I think it’s going right back to $125.”

TJX Companies, Inc. (NYSE:TJX) is a discount retailer known for its diverse selection of products, including family clothing, home goods, jewelry, and more. Bretton Fund stated the following regarding The TJX Companies, Inc. (NYSE:TJX) in its Q4 2024 investor letter:

“Pre-pandemic, The TJX Companies, Inc. (NYSE:TJX) and Ross were usually in lockstep operationally and performance-wise. The main difference is TJX is much larger and has more divisions: TJ Maxx has higher-end goods; Marshalls has lower price points and is very similar to Ross; HomeGoods and Homesense offer furniture and household goods. But as inflation spiked up, TJX was better able to push through price increases, helped in part due to its relatively higher-income shoppers being less sensitive to inflation. TJX’s earnings growth and share price have outperformed Ross the past few years, but we expect that to converge in the near term. TJX’s and Ross’s earnings increased an estimated 9% and 11%, respectively, and their stocks returned 31% and 10%.”