In this article, we will take a detailed look at the 10 Stocks to Buy and Sell Before Third Quarter According to Jim Cramer.
Jim Cramer in a latest program discussed the changing consumer trends in the US, wondering whether the consumer is just “fed up” of paying high prices and becoming “frugal.” Cramer said this “frugal thesis” is not “obvious” but he has recognized this latest trend based on some new developments. Cramer named a few consumer companies that are benefitting from the changing consumer behavior because of their discounted price offerings. Cramer rejected the notion that dollar stores are cheap. He said these stores raise prices “aggressively” and calling them dollar stories has become a “misnomer.” The CNBC host said the consumers “want prices lower” and that’s why dollar store companies are getting crushed in the new environment.
Jim Cramer also said the “renting society” is winning the “owning society,” pointing to a new trend where consumers are renting boats instead of buying them to enjoy the experience without spending a fortune.
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked some stocks he’s recommending investors to buy or sell. With each stock we have mentioned the number of hedge fund investors. 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).
10. Novavax Inc (NASDAQ:NVAX)
Number of Hedge Fund Investors: 14
Jim Cramer is bearish on Novavax Inc (NASDAQ:NVAX). He thinks COVID was a “very lucky break” for biotech companies like Novavax Inc (NASDAQ:NVAX).
“But it’s not going to get me into that stock. It lost too much money for people.”
The struggling Novavax Inc (NASDAQ:NVAX) last month got relief after French drugmaker Sanofi entered a deal with NVAX that will help co-commercialize its COVID-19 jab Nuvaxovid and develop combination vaccines. Novavax Inc (NASDAQ:NVAX) will receive up to $1.2 billion in cash from the deal. There would be an upfront payment of $500 million and another $700 million in potential development and launch milestones.
The company talked in detail about the deal in a latest earnings call:
And we expect our royalties and milestones from Sanofi’s efforts with Nuvaxovid to exceed the value of what our own efforts might have yielded, if we had kept the product ourselves exclusively. By licensing Sanofi to use our Nuvaxovid to develop their own combination Flu and COVID products, and to use Matrix-M as a component of other vaccines across their portfolio. We expect to realize substantial additional royalties and milestones valued potentially in the billions of dollars, driven by Sanofi’s product development and commercialization efforts over the years and decades to come. The royalties and milestones associated with potential new vaccines, Sanofi may develop using Matrix-M as well as those royalties and milestones anticipated from sales of our COVID-19 vaccine and the development of Sanofi’s combination flu COVID and other potential combination vaccines, should help us to sustain cash flow as we invest in our own R&D in an efficient and thoughtful manner for years to come.
During the first quarter, the company was able to narrow its loss by 50% year over year and increase revenue by 16%
While Novavax Inc (NASDAQ:NVAX) has secured a lifeline to sell its vaccines, its royalty sales will decline enormously. With too much hinging on Sanofi and lack of diverse growth catalysts, NVAX bears believe the stock is not a long-term play in the biotech space.
9. CAVA Group Inc (NYSE:CAVA)
Number of Hedge Fund Investors: 26
Restaurant chain company CAVA Group Inc (NYSE:CAVA) is one of the stocks Jim Cramer is recommending investors to buy on the dip. Here is what Cramer said during a latest program”
” CAVA feels like it has the possibility of being a Chipotle.”
Cramer said he knows the stock had a “big spike” recently, but he’d buy more CAVA Group Inc (NYSE:CAVA) shares if the stock comes down.
Last month, CAVA Group Inc (NYSE:CAVA) reported upbeat Q1 results and hiked full-year guidance. CAVA Group Inc (NYSE:CAVA) now sees 2024 restaurant comparable sales growth of 4.5% to 6.5%, compared with the consensus estimate of +4.5%. Adjusted EBITDA guidance was increased to $100 million to $105 million from a prior outlook for $86.0 million to $92.0 million. CAVA Group Inc (NYSE:CAVA) average unit volume (AUV) has impressed investors while its restaurant-level profit margins, guided to 24% for 2024, are also upbeat given the current market environment.
CAVA Group Inc (NYSE:CAVA) shares have gained about 124% so far this year and the stock’s P/E ratio is now 224, triggering valuation concerns. While CAVA Group Inc (NYSE:CAVA) has reported closed to 30% YoY sales growth over the past couple of quarters, Cava bears say the company might not be able to sustain its comparable sales growth down the road as comp sales growth is easy to achieve during early growth stages. They also say most of CAVA Group Inc (NYSE:CAVA) store footprint spans rich neighborhoods with high population density, and as CAVA expands its store footprint to other areas its profit from growth might moderate. The stock’s forward P/E ratio of 370 is outlandishly higher than industry average of 16.65. Average Wall Street price target on the stock is $87, below its current price of $91.
8. SoFi Technologies Inc (NASDAQ:SOFI)
Number of Hedge Fund Investors: 31
Jim Cramer recently said in a program that he’d “wait” on Sofi because he didn’t “like” SoFi Technologies Inc (NASDAQ:SOFI) latest quarter.
“Right now, that last quarter was not great. I just didn’t like it. And I’m going to have to wait.”
Oppenheimer recently published a list of buy and sell stocks in different categories and SoFi Technologies Inc (NASDAQ:SOFI) made it to the list as a Sell under Financials category. The stock is down 32% so far this year. However, SoFi Technologies Inc (NASDAQ:SOFI) bulls believe the stock is a buy on the dip. During the first quarter SoFi Technologies Inc (NASDAQ:SOFI) revenue jumped 26% year over year while earnings expanded from $0.05 to $0.02 on a YoY basis. SoFi Technologies Inc (NASDAQ:SOFI) management recently said it’s working on new products and services that could drive SOFI revenue growth at a 25% CAGR over the next three years. Wall Street expects the online personal finance platform SoFi Technologies Inc (NASDAQ:SOFI) earnings to grow 125.00% this year and 166.70% next year. Average analyst price target on the stock is $8.61, which presents a 30% upside to the current price. SoFi Technologies Inc (NASDAQ:SOFI) expects to achieve GAAP Net Income of $165-175 million and Diluted EPS of $0.08-$0.09 during the full-year 2024.
Patient Capital Opportunity Equity Strategy stated the following regarding SoFi Technologies, Inc. (NASDAQ:SOFI) in its first quarter 2024 investor letter:
“SoFi Technologies, Inc. (NASDAQ:SOFI) fell in the first quarter despite delivering strong 4Q results and 2024 guidance supported by their non-lending businesses. The company continues to gain share in the digital lending and neo-banking space, consistently growing deposits at $2B a quarter. What differentiates the company is their focus on prime and super-prime customers (average FICO 749). Sofi is early in its life cycle, currently being a small player in a very large total addressable market (TAM). With their strong management team, we believe the company will continue to deliver on their guidance of strong growth and expanding margins.”
7. Unity Software Inc (NYSE:U)
Number of Hedge Fund Investors: 35
Jim Cramer in a latest program recommended investors to say away from Unity Software Inc (NYSE:U), calling the stock a “falling knife.”
Unity Software Inc (NYSE:U) has lost a whopping 57% so far this year and Unity bears believe it’s not a buy-on-the-dip stock since its valuation based on EBITDA should be seen in context of low free cash flow and high adjustments.
Analysts believe Unity Software Inc (NYSE:U) merger with ironSource ran into integration problems that would weigh on expectations related to the deal. As of May Unity Software Inc (NYSE:U) has $2.2 billion of convertible notes and $1.2 billion in cash. This shows Unity net debt stands at about $1 billion. During the first quarter Unity Software Inc (NYSE:U) had $79 million of adjusted EBITDA but its free cash flow translated into a negative $15 million. During the first quarter, total revenue fell 8% year over year. Amid this lackluster performance and volatility, Unity Software Inc (NYSE:U) isn’t a strong buy for investors looking for stability in the current environment.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Unity Software Inc. (NYSE:U) in its first quarter 2024 investor letter:
“Unity Software Inc. (NYSE:U), a leading provider of mobile game development and monetization software, saw shares decline as the company detailed a restructuring strategy that will take some time to realize. Unity plans to divest its unprofitable and lower-margin segments such as professional services and to reaccelerate growth rates through product development and new partner distribution strategies. We expect the company to be largely through the transition by late 2024, and we believe investors should begin to anticipate the positive 2025 outlook well in advance.”
6. Ford Motor Co (NYSE:F)
Number of Hedge Fund Investors: 41
Jim Cramer recently said that he thinks Ford Motor Co (NYSE:F) stock should be bought on the dip. While discussing the stock on CNBC, Cramer rejected the notion that F series is “not doing well.”
“That is not correct. The F series continues to take the share.”
Wall Street is also bullish on Ford Motor Co (NYSE:F). Morgan Stanley’s Adam Jonas recently said in a bullish note that Ford is a top auto sector pick amid Ford Motor Co (NYSE:F) changing EV strategy. Jonas thinks Ford Motor Co (NYSE:F) understands that its EV strategy needs to change “materially” as Ford looks to dial back vertical integration in favor of partnership and cooperation. Jonas thinks market gains in the pickup segment, alliances with strategic partners such as Volkswagen and Google and strong implementation of Ford+ strategy are some of the growth catalysts for the stock. Morgan Stanley has an Overweight on Ford Motor Co (NYSE:F) and a price target of $17.00.
BofA expects Ford Motor Co (NYSE:F) operating EPS growth to be modest this year but accelerate after that. Ford Motor Co (NYSE:F) per-share profit by 2026 is expected to come in at $3. Ford Motor Co (NYSE:F) forward P/E ratio of 6.09 is much lower than the industry average of 15 and its historical P/E of 9.1.
