In this article, we will take a look at the 10 stocks that Jim Cramer and hedge funds have in common. If you want to explore similar stocks, you can also take a look at 5 Stocks Jim Cramer and Hedge Funds Have in Common.
“These Uninformed Sellers, They Make Way For The Well Informed Buyers”
On April 20, Jim Cramer weighed in on the recent market volatility we have been experiencing. Cramer has spotted a pattern that the market has been exhibiting recently and noted that while the market opens low, it recovers throughout the day as “buyers come in and scoop up stocks”. According to Cramer, “uninformed sellers make way for the well informed buyers”.
Cramer attributes the morning weakness of the market to a variety of factors, firstly negative news from Europe. Cramer noted that currently, Europe is not performing well in comparison to the United States since inflation is still running high in the region and that is calling for higher interest rates from the ECB.
Another reason that is currently causing market volatility, according to Jim Cramer, is negative macroeconomic speculation. Cramer noted that before the opening bell, economists and strategists speculate negatively about rate hikes from the Fed and this results in the market opening low.
Thirdly, Cramer thinks that geopolitical tensions are another major factor contributing to the morning weakness of the markets. Here is what he said:
“Hardly a day goes by without a negative story on one of these fronts. Overnight, nothing good is ever gonna happen in China right. Then you gotta pray their government doesn’t make any comments about the need to retake Taiwan. You won’t hear anything particularly good about Ukraine either, and you certainly can’t expect anything good to come out of Washington, especially when it comes to debt ceiling negotiations.”
Finally, the Mad Money host talked about “a negative bias” that results from analyst downgrades, and results in short sellers making “stocks look real ugly”. Cramer noted that short sellers engage in aggressive short selling and this causes investors to panic and exit their positions as well. However, short sellers create opportunities for “people who do their homework”. Cramer noted that intelligent investors allow for “this big batch of sellers to give them better prices” and then they buy and take stocks higher.
To conclude, Cramer thinks that “well informed buyers” can profit in the current market. He simplified the behavior of the market by explaining how we have “a negative bias every morning emanating from Europe, coupled with a gloomy group of money managers who simply don’t believe that bear market has ended”. In such an environment, Cramer has become increasingly selective about stocks. We have compiled a list of 10 stocks that Jim Cramer and hedge funds have in common, so our readers can gain further insights into what kind of companies they should consider positioning in given the turbulent market situation. Some of Cramer’s top stock picks that are popular among elite money managers include NVIDIA Corporation (NASDAQ:NVDA), UnitedHealth Group Inc. (NYSE:UNH), and Meta Platforms, Inc. (NASDAQ:META). Let’s now discuss these stocks, among others, in detail below.
Our Methodology
To determine the stocks that Jim Cramer and hedge funds have in common, we first came up with a list of Cramer’s stock picks. We watched Mad Money episodes aired over the past 2 weeks and compiled a list of stocks that Jim Cramer has given bullish calls on, on his show. We then sourced each stock’s hedge fund sentiment from Insider Monkey’s database of over 900 hedge funds. We narrowed down our selection to the stocks that were the most widely held by institutional investors. These stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
10 Stocks Jim Cramer and Hedge Funds Have in Common
10. BlackRock, Inc. (NYSE:BLK)
Number of Hedge Fund Holders: 49
Cramer talked about BlackRock, Inc. (NYSE:BLK) and said that he would buy the stock on pullbacks because the company is a “known compelling long-term winner” and he also likes the company’s software. As of April 20, the stock has gained 16.39% over the past 6 months. BlackRock, Inc. (NYSE:BLK) is one of the stocks that Jim Cramer and hedge funds have in common.
On April 14, BlackRock, Inc. (NYSE:BLK) posted earnings for the fiscal first quarter of 2022. The company generated a revenue of $4.24 billion and reported an EPS of $7.93, outperforming EPS estimates by $0.20.
49 hedge funds disclosed having stakes in BlackRock, Inc. (NYSE:BLK) at the end of Q4 2022. The total value of these stakes amounted to $2.5 billion. As of December 31, Harris Associates is the largest shareholder in the company and has a stake worth $557 million.
Baron Funds made the following comment about BlackRock, Inc. (NYSE:BLK) in its Q4 2022 investor letter:
“Shares of BlackRock, Inc. (NYSE:BLK), the world’s largest asset manager, increased during the quarter. Despite volatility and a mid-December decline, most equity markets finished higher in the quarter, and BlackRock, which is heavily tied to these markets, benefited. Additionally, investors are anticipating that the company’s fixed income products will experience growth in 2023. Alternative strategies are expanding as well and should continue to provide a profitable revenue stream.”
9. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 55
Cramer’s charitable trust owns Morgan Stanley (NYSE:MS). The Mad Money journalist recently broke down the company’s earnings and said that though the company reported higher than expected loan losses and “disappointing” investment banking line items, an important metric to consider for Morgan Stanley (NYSE:MS) is “net new assets because these guys are increasingly in the asset management business”. Cramer noted that the company’s wealth management arm increased its net new assets by $110 billion which was a “gigantic win” for the stock. Morgan Stanley (NYSE:MS) is one of the stocks that Jim Cramer and hedge funds have in common.
Morgan Stanley (NYSE:MS) announced earnings for FQ1 2023 on April 19. The company generated a revenue of $14.52 billion for the quarter and outperformed Wall Street estimates by $564.88 million. The company reported an EPS of $1.74 and beat EPS expectations by $0.08.
55 hedge funds disclosed having stakes in Morgan Stanley (NYSE:MS) at the end of Q4 2022. The total value of these stakes amounted to $2.98 billion. As of December 31, Eagle Capital Management is the largest shareholder in the company and has a stake worth $617.8 million.
8. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 66
Cramer owns Costco Wholesale Corporation (NASDAQ:COST) through his charitable trust. He recently talked about the stock and called it a “best-in-show retailer”. Cramer talked about the company’s monthly sales report for March and said that though the company “reported a surprisingly weak month”, he does not see the company’s problem persisting over the next couple of months. According to Cramer, “Costco’s (NASDAQ:COST) too well-run to take a beating for more than a couple of months”.
On April 5, Costco Wholesale Corporation (NASDAQ:COST) announced retail sales for March. The company reported net sales of $21.71 billion, up 0.5% year over year from $21.61 billion.
At the end of Q4 2022, 66 hedge funds were long Costco Wholesale Corporation (NASDAQ:COST) and disclosed positions worth $3.4 billion in the company. Of those, Bridgewater Associates was the leading investor in the company and held a stake worth $427.9 million. Costco Wholesale Corporation (NASDAQ:COST) is one of Jim Cramer’s stock picks that is also popular among hedge funds.
Here is what Madison Funds had to say about Costco Wholesale Corporation (NASDAQ:COST) in its fourth-quarter 2022 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST) stock fell after November sales results showed a slowing consumer. The slower November sales were followed by a slight first quarter miss with lower-than-expected margins. Costco commented that they are not seeing trade-down but private label penetration has increased modestly. Traffic continues to be positive, and Costco remains well-positioned in a more challenging macro environment due to its strong value proposition.”
Some of Jim Cramer’s top stock picks right now include NVIDIA Corporation (NASDAQ:NVDA), UnitedHealth Group Inc. (NYSE:UNH), and Meta Platforms, Inc. (NASDAQ:META).
7. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 74
The Procter & Gamble Company (NYSE:PG) is one of Cramer’s “favorites for all of 2023”. He mentioned the stock among “great American companies with beaten down stocks”. Though costs for The Procter & Gamble Company (NYSE:PG) have been coming down, the stock has been beaten down to a point where it may be “too cheap”. Cramer thinks The Procter & Gamble Company (NYSE:PG) is “the king of consumer products goods” and he sees material upside to the stock. As of April 20, The Procter & Gamble Company (NYSE:PG) has gained 17.32% over the past 6 months.
The Procter & Gamble Company (NYSE:PG) was held by 74 hedge funds at the close of Q4 2022. These funds held positions worth $4.7 billion in the company. As of December 31, Bridgewater Associates is the top shareholder and has a stake worth $757 million. The Procter & Gamble Company (NYSE:PG) is placed ninth on our list of stocks that Jim Cramer and hedge funds have in common.
Rowan Street Capital made the following comment about The Procter & Gamble Company (NYSE:PG) in its Q4 2022 investor letter:
“Let’s look at The Procter & Gamble Company (NYSE:PG). Dividend yield is 2.4%. Earnings are forecasted to grow at 5.9%, and its current earnings multiple is at 25x. Now, lets say over the next 3-5 years the market loses interest in the “safe”, mature companies that grow at anemic rates and gets an appetite for growth again. It’s very unlikely that Mr. Market will be paying 25x for 5.9% earnings growth. Lets assume that multiple declines to the market average of 18x — that would be ~6.9% drag per year on the total expected return over next 3-5 years. If we get 2.4% (dividend) + 5.9% (earnings growth) – 6.9% (decrease in earnings multiple) = 1.4% (annual return we can expect on average from this stock).”
6. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 74
Jim Cramer has mentioned The Charles Schwab Corporation (NYSE:SCHW) multiple times in recent days and has been bullish on the stock. Most recently, Cramer spoke about how sentiment around The Charles Schwab Corporation (NYSE:SCHW) has been negative, but the company disproved the bears after releasing earnings for the fiscal first quarter of 2023. Cramer said “this may be the worst time to invest. But when a good company can see its stock fall by 30%, when there was nothing really wrong, worst time to invest, but invest”. Shares of The Charles Schwab Corporation (NYSE:SCHW) have gone down by 34%, as of April 20, and the stock is trading at a PE multiple of 14x.
On April 17, The Charles Schwab Corporation (NYSE:SCHW) announced earnings for the first quarter of fiscal 2023. The company generated a revenue of $5.12 billion, up 9.50% year over year, and reported an EPS of $0.93, ahead of EPS estimates by $0.03. The Charles Schwab Corporation (NYSE:SCHW) is one of Jim Cramer’s top stock picks that are popular among elite hedge funds.
At the close of the fourth quarter of 2022, 74 hedge funds were eager on The Charles Schwab Corporation (NYSE:SCHW) and held collective positions worth $8.1 billion in the company. Of those, GQG Partners was the most prominent shareholder and held a stake worth $1.4 billion.
Madison Investments made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2023 investor letter:
“We bought shares in The Charles Schwab Corporation (NYSE:SCHW) as they declined meaningfully in March. Schwab is the premier asset-gathering franchise in the brokerage industry, with particular strength in the advisory market. As one of the top two players in the retail side of the market, it has the scale economies to be a low-cost provider and compete with newcomers intent on industry disruption. In the advisory segment, where it serves independent advisors, it delivers the gold standard in service and product breadth. We believe its moat is wide, and it should grow at a healthy pace for the foreseeable future.
As part of its brokerage model, Schwab operates a meaningfully sized bank, where its brokerage clients maintain deposits as part of their cash management. With over $300 billion in deposits and $500 billion in assets, if it were an independent bank, it would be one of the largest in the country. As interest rates have risen, many clients have been moving cash from low-yield bank accounts to higher-yielding alternatives, such as money-market funds. The industry calls this process cash “sorting.” For Schwab, cash sorting began about 18 months ago, and a large part of its recent stock price drop can be attributed to investor concerns that this process may accelerate. The difference for Schwab, compared to all other banks, is that when depositors pull money out, they are mostly just moving it over to other parts of Schwab! Thus, unlike traditional banks, Schwab doesn’t lose assets in the sorting dynamic. In fact, like U.S. Bancorp, Schwab appears to be a net beneficiary from the recent mini-panic in that new asset inflows have picked up as individuals flee to safety.
This dynamic does cause some disruption at the bank entity, though, as client cash remains within Schwab’s total but is no longer available as deposits to fund the bank’s securities portfolio. We think Schwab has more than sufficient liquidity to deal with this. The realistic worst-case outcome is that total earnings are moderately suppressed for a period as funding costs go up, and Schwab earns less profit for every dollar invested in deposit alternatives, as compared to what it earns per dollar deposited in the bank. Despite this headwind, we believe that as long as Schwab can grow total investment assets under its umbrella over time, its earning power should also grow.”
In addition to The Charles Schwab Corporation (NYSE:SCHW), other stocks that both Jim Cramer and hedge funds have in common include NVIDIA Corporation (NASDAQ:NVDA), UnitedHealth Group Inc. (NYSE:UNH), and Meta Platforms, Inc. (NASDAQ:META).
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Disclosure: None. 10 Stocks Jim Cramer and Hedge Funds Have in Common is originally published on Insider Monkey.