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.
5. Twilio Inc (NYSE:TWLO)
Number of Hedge Fund Investors: 45
Cloud-based communications solutions Twilio Inc (NYSE:TWLO) is one of the stocks Jim Cramer is bearish on. When asked about the stock in a latest program, Cramer said:
“I still can’t recommend Twilio Inc (NYSE:TWLO)”
Morgan Stanley analyst Meta Marshall recently downgraded the stock to Equal-Weight from Overweight citing lack of growth catalysts for the next 12 months. The analyst also cut their price target on the stock to $60 from $70.
“The primary reason we are stepping to the sidelines on Twilio Inc (NYSE:TWLO) is a lack of a revenue catalyst over the next 12-18 months, limiting multiple expansion and potentially challenging ability to meet FY25 Street expectations. For Segment (<10% of revenues today), given itssale is largely an enterprise software sale vs. a developer sale (as much of the rest of the Twilioplatform is) combined with a number of key changes to structure / leadership, we think it shouldtake some time for growth to reaccelerate,” the analyst said.
However, the analyst said they still like the stock’s “long-term” story. Twilio Inc (NYSE:TWLO) Q1 results show Twilio is quickly improving its business and narrowing losses. During the first quarter its loss narrowed to $55.3 million when compared with a $342.1 million loss reported last year. Restructuring costs in the quarter came in at $9.9 million, down from $121.9 million reported last year. Gross profit margins rose from 48.75% to 51.96%. Twilio Inc (NYSE:TWLO) expects organic revenue growth of 5% and 10% this year. Adjusted operating income in the period is expected in the range of $585 million and $635 million up from $550 million and $600 million.
Average analyst price target on the stock for the next 12 months is $68.52, which presents a 22% upside potential. Given the improvement trajectory Twilio Inc (NYSE:TWLO) is on, the stock can be a nice option for long-term investors.
4. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Investors: 60
Jim Cramer said in latest program that any volatility in Chipotle won’t “deviate” him from his age-old bullish mantra on the stock.
“You know me, I am not going to deviate from my position. Own Chipotle, don’t trade it. For ages it’s been my manta and I am not going back on that.”
Chipotle is one of the stocks Barclays analyst Venu Krishna believes could offset the tech concentration risks.
In April, Chipotle Mexican Grill Inc (NYSE:CMG) posted strong Q1 results, which showed revenue in the period jumped by 13.9% on a YoY basis, beating estimates by $30 million. Comparable sales in the quarter increased by 7%. For the full year, Chipotle Mexican Grill Inc (NYSE:CMG) expects its comp sales to grow in the mid to high-single digit range. Chipotle Mexican Grill Inc (NYSE:CMG) has been steadily increasing its footprint over the past several years. Back in 2007, the company had just 704 stores. This figure now stands at 3437. One of the biggest signs of Chipotle Mexican Grill Inc’s (NYSE:CMG) strengths is its rising margins, even when the restaurant industry is reeling from high labor costs and squeezing margins. Chipotle Mexican Grill Inc’s (NYSE:CMG) current net margin of 12.45% is the highest it has been in the past decade.
Chipotle Mexican Grill Inc (NYSE:CMG) trades at 47X 2025 EPS estimate of $66.92 set by Wall Street analysts. This P/E is much higher than the industry of 16. Chipotle Mexican Grill Inc (NYSE:CMG) is expected to see revenue growth of just 13-15% per year over the next 3 years, while its EPS growth is expected to come in between 3% to 20%. Analysts expect the American consumer to remain prudent in spending amid higher for longer interest rate scenario and dwindling savings. Therefore, for investors looking for high-growth stock appreciation names, Chipotle Mexican Grill Inc (NYSE:CMG) might not be the ideal choice.
Average analyst estimate for Chipotle Mexican Grill Inc (NYSE:CMG) is $3244.77, which presents just 3% upside potential from the current levels. That means the Wall Street believes the stock has reached its potential and based on current catalysts and growth trajectory it does not have any room to grow significantly.
Rowan Street Capital stated the following regarding Chipotle Mexican Grill, Inc. (NYSE:CMG) in its first quarter 2024 investor letter:
“The best investment ideas are simple. We have previously written about Chipotle Mexican Grill, Inc. (NYSE:CMG). It turned out that this was our best investment idea since starting the fund. The stock is up 10x since we first invested at the end of 2017 (~47% annualized). Sounds absolutely incredible, except that your managers sold CMG back in 2018 (thinking that the stock had gotten ahead of itself), and proudly booked an 85% profit in 6 months, patting ourselves in the back. Interestingly, when we wrote about this in our 2019 letter, describing our big mistake to sell, the stock still went up +270% since that letter, delivering an impressive 30% annual return. This is an incredibly important point! You do not get many Chipotles in your investing career. Companies like these are super rare and the opportunity to buy them at an attractive price (which we got in 2017) is even rarer. Booking a quick profit, paying the capital gains tax and thinking that you will find another CMG to invest your proceeds into is usually delusional.
Along with our personal investment case of CMG, let us compare that to the experience that Bill Ackman had with the same investment. He is a famous hedge fund manager that we greatly admire, who has achieved an incredible track record in the past 20 years running Pershing Square. Bill Ackman has owned the restaurant stock since the third quarter of 2016 at an initial cost basis of about $411 per share (our cost basis was $289). Originally, Mr. Ackman bought 2.88 million shares. He was wise to hold on to CMG stock and it still is the top position in his fund (18% weight). But, if you follow his 13F filings, which are the public filings disclosing large investment manager’s holdings of publicly traded securities, he kept trimming his position as the stock went up. We calculated that if he just sat on his original 2.88 million shares and didn’t sell a share, his position would be worth $8.8 billion today. This would represent ~50% of his entire firms’ assets under management (AUM). But he only has $1.8 billion invested in CMG as of Q1 2024. As Charlie Munger said: ““The first rule of compounding is to never interrupt it unnecessarily.”…” (Click here to read the full text)
3. Vistra Corp (NYSE:VST)
Number of Hedge Fund Investors: 79
Texas-based electricity and power Vistra Corp (NYSE:VST) is one of the stocks Jim Cramer is bearish on. When asked about Vistra Corp (NYSE:VST) during a recent program, Cramer said:
“It’s a momentum stock, and momentum stocks can’t really withstand that kind of drop.”
Cramer thinks Constellation is a better stock than Vistra Corp (NYSE:VST).
Vistra Corp (NYSE:VST) is a power generation company that is also involved in electricity generation and wholesale energy purchases and sales. Vistra Corp (NYSE:VST) has about 5 million customers and operates a 41,000-megawatt portfolio of natural gas, coal, nuclear, and solar assets, as well as battery storage facilities.
Citi recently published a list of utilities stocks that it’s bullish on amid the importance of power grids, growth in renewable energy and AI-powered demand. Vistra Corp (NYSE:VST) is one of the stocks Citi likes.
Guggenheim analyst Shahriar Pourreza who holds a Buy recommendation and a Street-high price target of $133 on Vistra Corp (NYSE:VST) thinks VST is a “unicorn” for its portfolio of both gas and nuclear power plants. Pourreza further said in his note to clients that data centers are exploring 24-hour power sources that are clean and “nuclear plants are a very strong avenue for that”, further adding to his thesis for the stock.
Meridian Hedged Equity Fund stated the following regarding Vistra Corp. (NYSE:VST) in its first quarter 2024 investor letter:
“Vistra Corp. (NYSE:VST) is an integrated retail electricity and power generation company based in Irving, Texas. It operates in 12 states and six of the seven competitive markets in the U.S. Vistra’s retail brands serve approximately 2.9 million customers and its power generation fleet totals approximately 41,000 megawatts of natural gas, nuclear, coal, and solar facilities. Vistra was a top performer in the strategy over the past quarter, with its shares rallying over 80%. A key driver has been the thesis that the projected growth of power-hungry data centers, spurred by the rise of generative AI, will increase electricity demand and power prices. This is expected to significantly benefit incumbent power generators like Vistra. The company’s efficient generation portfolio, especially its nuclear and natural gas plants, is well-positioned to capitalize on rising demand, scarcity pricing, and ancillary services in the Texas power market. Vistra is also pursuing opportunities to potentially sign high-margin power offtake agreements directly with data center customers for its nuclear plants, similar to a recent deal by peer Talen Energy and Amazon. We continue to like Vistra’s strong free cash flow generation supporting continued share buybacks and debt reduction, synergies from the recent Energy Harbor acquisition, and a favorable power market backdrop with rising spark spreads. We trimmed the stock following its strong performance during the period.”
2. Eli Lilly And Co (NYSE:LLY)
Number of Hedge Fund Investors: 109
When asked about Viking Therapeutics in a latest program, Cramer said he is a “LLY guy.”
“LLY is a huge position in the charitable trust and I am not going to deviate from a young company.”
Cramer also said that to “go up against LLY is very very hard.”
Jim Cramer has been recommending Eli Lilly And Co (NYSE:LLY) for the past several months amid the company’s strong foray into weight loss drugs and other growth catalysts.
Goldman Sachs recently said in a report that estimated global sales from next-gen obesity drugs could reach $130 billion in 2030, up from its previous estimate of $100 billion. Goldman Sachs highlighted that Eli Lilly & Co (NYSE:LLY) and Novo Nordisk are expected to retain their “duopoly” in the market with an 80% market share through 2030.
Eli Lilly & Co (NYSE:LLY) shares are trading at a P/E of 123, much higher than its 5-year average of 50 and industry median of 33. However, Eli Lilly & Co (NYSE:LLY) blockbuster weight loss drugs like Mounjaro and Zepbound and their growth potential coupled with raging demand for weight loss drugs back this high valuation, according to several market analysts. Last month, Eli Lilly & Co (NYSE:LLY) shares skyrocketed after its diabetes treatment Mufengda® (Tirzepatide Injection) got approval in China which is amongst the countries with the highest recorded cases of diabetes.
Eli Lilly & Co (NYSE:LLY) is expected to see about 120% earnings growth this year and 40% earnings growth next year. Analysts at BofA see Eli Lilly & Co’s (NYSE:LLY) earnings more than doubling this year. The stock is trading at 43x its 2025 EPS estimate of $19.28 set by Wall Street. Eli Lilly’s revenue growth in 2025 could come in at 23.40%, based on data from Yahoo Finance. This high growth in earnings and revenue is more than enough to justify Eli Lilly & Co’s (NYSE:LLY) current stock price, given the company’s market-leading position in the weight loss market.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
1. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 115
Jim Cramer in a latest program said Micron is a “quiet bellwether” of “non-AI” and “some AI” semiconductor plays because the company’s “strength” is high-bandwidth memory which is used all across the “semiconductor food chain.” Cramer said even though Micron had doubled since October, “I bet it’s not done going up.”
Wall Street is taking notice of Micron Technology Inc’s (NASDAQ:MU) ascendance in the AI industry dominance hierarchy. BofA thinks Micron Technology Inc (NASDAQ:MU) is one of the Big 10 AI stocks in 2024, having gained about a massive 62% so far this year.
UBS recently maintained a Buy rating on Micron Technology Inc (NASDA:MU) and increased its price target on the stock to $155 from $125, citing its industry checks pointing to higher prices in the DRAM and NAND memory industry. UBS said that Micron Technology Inc’s (NASDA:MU) valuation could become attractive once its gross margin peaks in the fourth quarter of 2025 . UBS expects Micron Technology Inc’s (NASDA:MU) EPS in 2025 to come in at around $17.50.
Sequoia Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its fourth quarter 2023 investor letter:
“Exits last year included Netflix, Bank of America and Micron Technology, Inc. (NASDAQ:MU). As discussed in our Q2 shareholder letter, we exited Micron after the rationale for our investment was strained by rising geopolitical tensions, which have increased investment risks in the high-performance semiconductor industry. These risks are bearable, but we felt it prudent to reduce the portfolio’s exposure to them. We think both Bank of America and Micron were purchased at conservative prices given the facts at hand, but the facts changed and we moved on.”
While we acknowledge the potential of Micron Technology Inc (NASDAQ:MU), our conviction lies in the belief that under the radar 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 MU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
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