We recently published Jim Cramer’s Exclusive List: 10 Stocks You Should Keep an Eye On. In this article, we are going to take a look at where The Timken Company (NYSE:TKR) stands against Jim Cramer’s other stocks to keep an eye on.
In a recent episode of Mad Money, Jim Cramer expressed frustration with analysts who attempt to explain stock movements during each trading session without acknowledging the unpredictable nature of the market and those who trade stocks for a living. He noted that while the Dow rose by 125 points, the S&P increased by 1.07%, and the NASDAQ jumped 2.17%, these gains resulted from conflicting market perceptions. Only one view can hold up in the end, and the process restarts the next day.
“Okay, look, it keeps happening, and it’s beginning to drive me even crazier than I already am. I’m talking about analysts attempting to explain why stocks do what they do in any given session without taking into account the capriciousness, if not the lunacy, of those who trade stocks for a living.
Sure, the averages appear to tell a decent story. The Dow inching up 125 points, the S&P climbing 1.07%, and the NASDAQ vaulting 2.17%, but those percentages are the product of a furious battle between competing visions of reality. And only one vision can survive.
Cramer explained that the day saw the release of an important, though not game-changing, Consumer Price Index (CPI) report, just days before an anticipated Federal Reserve rate cut. With market tensions high, the inline CPI data didn’t surprise anyone. However, Cramer pointed out that despite the CPI meeting expectations, stock futures remained down early in the day. When the market opened, stocks continued to drop, confusing commentators. Some analysts attributed the selloff to disappointment over the possibility of only a quarter-point rate cut rather than a half-point cut. Cramer was shocked by this explanation, calling it inaccurate.
“Only one vision can hold up under close scrutiny before it all starts over again the next morning. Today, like many days, we got a somewhat crucial set of figures from the government. This time it was for the Consumer Price Index. Notice I said “somewhat” crucial because we’re now just days away from the Federal Open Market Committee meeting, where we’re likely to get a rate cut. Any session between now and then could be an outlier that might alter the Fed’s core mindset.
When you’re in Fed mode, as we are, you know that tensions are heightened, which is why it was good to see a basically in-line CPI reading— nothing important, nothing shocking, just a number we all expected. So, we’ll probably get the quarter-point rate cut that we’re looking for. But next, you know, various speakers and interviews started ginning up reasons to explain why the Dow had dropped more than 700 points in the first hour of trading, and the NASDAQ was off 1.5%.
The pontificators were frantic. After a few tries, they settled on a new narrative that we had to listen to for a couple of hours. Many people were banking on a half-point rate cut, they said, and this 2.5% inflation number made a double rate cut very unlikely. We were told that led to disappointment and then furious selling of stocks.”
Jim Cramer mentioned an earlier interview with Doug Yearley, CEO of Toll Brothers, who had a positive outlook on the housing market, expecting it to strengthen further if rates were cut. Cramer believed the upcoming rate cuts could spark a housing boom, which would benefit the broader economy. Confident in this view, Cramer and his colleague Jeff Marks, during their CNBC Investing Club show, expressed confusion over the market’s decline, with Cramer even predicting that the averages could end the day higher, though that didn’t materialize.
“Now, I was aghast. Can I just say? I was aghast at this wholesale license of the truth. I had just come from an interview with Doug Yearley on Squawk on the Street. He told me the business had gotten very strong in August and September and could only get stronger as rates fell. Doug is a straight shooter, not a lot of fluff, but he basically said, “Look out if rates go down from here.”
He was effusively, empirically positive on the coming rate cuts. He and I are both students of financial history, and these rate cuts, 25 basis points at a time, could ignite housing sales. That’s huge for the business of our country, even though housing is only 10% of the economy. It’s connected to so many other areas that I always like to say it punches above its weight. So I figured it was time to commit heresy.”
Cramer criticized the notion that the market’s decline was due to disappointment over the CPI reading, calling it “nonsense.” He argued that sellers were misjudging the situation and misunderstanding the potential power of rate cuts. For him, there’s no harm in calling out irrational behavior in the market and stating that sellers were clueless in this instance. He dismissed the idea of inventing justifications for market actions, especially when they clearly didn’t make sense.
“I predicted that the average could actually finish up but it didn’t happen. I refused to dignify the musings of commentators who clung to the fiction that bulls were disappointed by the CPI reading. I knew the early action was just nonsense. Furthermore, I knew the sellers were wrong.
What’s wrong with honestly stating the sellers are clueless and don’t understand the power of rate cuts? Why can’t I do that? Where does it say we always have to be descriptive and can’t be judgmental? I don’t feel like making things up to ratify, if not justify, the action in a given day, especially not when the action is so clearly wrong and nonsensical.”
Our Methodology
This article talks about a recent episode of Jim Cramer’s Mad Money, where he highlighted several stocks. We selected ten of those companies and analyzed hedge fund investments in each. Finally, we ranked the companies based on hedge fund ownership, from least to 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).
A close-up of a precision-engineered bearing from the company, gleaming in the light.
The Timken Company (NYSE:TKR)
Number of Hedge Fund Investors: 31
Jim Cramer described The Timken Company (NYSE:TKR) as a classic example of a cyclical stock that performs well in a strong economy but faces challenges during economic downturns. He believes that The Timken Company (NYSE:TKR) is suited for the current economic climate, though he’s hesitant to say it’s the best choice right now.
“The Timken Company (NYSE:TKR) is a textbook smokestack stock, the kind of cyclical company that thrives in a strong economy but struggles during a downturn. I think The Timken Company (NYSE:TKR)’s right for this moment, but it might not be the most right. I can’t make that judgment until we learn more, which is why I’d love to have CEO Tarak Mehta on the show to dig deeper. “
The Timken Company (NYSE:TKR) is an attractive investment due to its stable financial performance, strategic growth efforts, and positive earnings outlook. In Q2 2024, The Timken Company (NYSE:TKR) reported $1.18 billion in sales and an adjusted EPS of $1.63, beating expectations despite a 7.1% drop in sales compared to the previous year, mainly due to lower demand in some markets. The Timken Company (NYSE:TKR)’s strong profitability is evident from its 19.5% adjusted EBITDA margin, showcasing its ability to remain resilient amid economic challenges.
The Timken Company (NYSE:TKR) is expanding its motion-control platform through strategic acquisitions, like CGI Inc., and investing in research and development to enhance its engineered bearings segment. Analysts expect EPS to rise to $1.91 by Q2 2025. Additionally, The Timken Company (NYSE:TKR) offers a stable dividend yield of 1.73% with a sustainable payout ratio of 25.9%, making it appealing to income-focused investors.
Overall TKR ranks 7th on Jim Cramer’s list of the stocks to keep an eye on. While we acknowledge the potential of TKR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.