Jim Cramer, the host of Mad Money, recently shared some investment guidelines based on his 40 years of experience. As we previously discussed in our article, Jim Cramer Talked About These 8 Stocks, Cramer emphasized that both bulls and bears can profit, but greed leads to losses, advising investors to take profits and avoid being overly greedy. His second rule is that paying taxes is acceptable. Finally, Cramer stressed the importance of not making large, all-at-once buys or sales, recommending gradual adjustments to positions instead.
In addition to these guidelines, Cramer’s next rule was to recognize the importance of distinguishing between damaged stocks and damaged companies. He explained that buying stocks from companies that are fundamentally flawed is a mistake with no chance of recovery, but stocks of companies that are simply experiencing temporary issues may present a buying opportunity. This distinction is critical because, as Cramer pointed out, there’s no “money-back guarantee” when buying into a company with long-term problems.
Investors should focus on finding stocks that are down for reasons that aren’t related to poor company fundamentals. Cramer then moved on to his next rule, which is to always do the relevant homework.
“If you want to build a portfolio of individual stocks, that’s a big if since there’s nothing wrong with getting all of your equity exposure from a cheap index fund that mirrors the S&P 500, well, you gotta be rigorous about it. Which brings me to my next rule: Do the homework.”
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Cramer said that doing the homework means more than just picking stocks based on a gut feeling; it involves actively researching companies by listening to earnings calls, reading research reports, and staying on top of the news. Cramer noted that some investors dismiss this kind of work, seeing it as unnecessary or outdated in today’s fast-paced world. However, he was clear in his belief that failing to do proper research before buying stocks is foolish and can lead to poor investment choices.
Cramer further emphasized that doing homework today is easier than ever. With so much information available on the internet, there’s no excuse for not gathering as much data as possible. For those who don’t have the time or inclination to dive deep into individual stocks, Cramer suggested that index funds are a great alternative. Another crucial rule that Cramer continually stresses is the importance of diversification.
“The next rule is another essential that I harp on constantly: Diversify, diversify, and diversify. Always be diversified, that controls risk, and managing risk is really the holy grail of this business. What’s the biggest risk out there? It’s called sector risk.”
Sector risk refers to the potential for a specific sector of the economy to lag, which can result in negative impacts on investments within that sector. Cramer explained that sector risk is one of the most significant dangers to an investment portfolio, and diversification is the only way to protect against it.
He frequently says that “diversification is the only free lunch in this business” because it’s the one investment principle that benefits everyone. As per Cramer, by mixing different sectors in a portfolio, at least five according to him, investors can prevent themselves from suffering catastrophic losses if one particular sector takes a hit.
“Here’s the bottom line: Whether you’re an amateur or professional, you always need to do your homework and keep your portfolio diversified. This is the kind of routine maintenance that protects you from monster losses down the line. Remember, if you can keep your losses to a minimum and let your gains run, you almost always come out ahead. But don’t try to rationalize those losses because stocks don’t always come back to even or anywhere near that.”
Jim Cramer Talked About Thermo Fisher Scientific Inc. and Others
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episodes of Mad Money. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8. Rigetti Computing, Inc. (NASDAQ:RGTI)
Number of Hedge Fund Holders: 7
Cramer said quantum computing stocks like Rigetti Computing, Inc. (NASDAQ:RGTI) are all parabolic and explained:
“Okay, so that’s quantum computing. They are all the same. I mean, no, of course, the actual companies aren’t the same, but the stocks are. They’re all parabolic. If you come in, you have to understand, at this point, it is pure speculation. It can keep going up, but they’re all trading the same way. Anything that’s quantum computing and mostly it’s related to how it’s going to help healthcare. I am not a believer at this stage. I wish I’d caught them earlier.”
Rigetti Computing (NASDAQ:RGTI) designs and builds quantum computers and superconducting quantum processors, offering quantum computing as a service through cloud-based systems, along with quantum software and cloud integration support. Recently, quantum computing stocks have gained significant attention, driven by major developments in the field.
A notable highlight came from Google’s release of its Willow quantum chip, which is capable of performing complex calculations in just five minutes. This breakthrough has allowed shares of quantum computing companies, including Rigetti, to ride the wave and surge. Over the past year, Rigetti’s stock has risen by more than 1,550%.
However, it should be noted that there is a significant disparity between the skyrocketing market capitalization of the stock company, which is over $4.8 billion, and its actual performance. Rigetti Computing (NASDAQ:RGTI) third-quarter revenue was $2.4 million, down from $3.1 million in Q3 of 2023.
7. Altimmune, Inc. (NASDAQ:ALT)
Number of Hedge Fund Holders: 13
Cramer observed that healthcare stocks like Altimmune, Inc. (NASDAQ:ALT) are trading badly these days because they are “out of fashion”.
“Well, it’s trading with, it’s trading with Eli Lilly because a lot of people feel it’s got similar drugs for different issues like obesity. Eli Lilly trades like death. What can I tell you? I mean, these stocks all trade badly right now. It can come back, but you have to understand that right now, healthcare is so out of fashion. It doesn’t matter how good it is.”
Altimmune (NASDAQ:ALT) is a clinical-stage biopharmaceutical company focused on developing treatments for obesity and liver diseases. While the stock has been down recently, it recently was included in the Nasdaq Biotechnology Index (Nasdaq: NBI), marking an important recognition for the company after a year of significant progress.
Vipin K. Garg, Ph.D., President and CEO, commented that the company’s inclusion in the NBI highlights the advancements made and sets the stage for the upcoming developments in 2025. These include the release of topline data from the Phase 2b IMPACT trial of pemvidutide in MASH in the second quarter, which the company views as a key inflection point. Pemvidutide is a new experimental medication made from peptides, designed to target two specific receptors in the body.
It’s being developed to help treat obesity and a liver condition called MASH (which stands for Metabolic Associated SteatoHepatitis). Pemvidutide has shown promising results in clinical trials, positioning it as a potentially strong competitor in the obesity treatment market. Unlike some rival treatments, it appears to minimize muscle mass loss in patients, which could make it a significant player if approved by regulators.
In the third quarter, Altimmune (NASDAQ:ALT) successfully completed its End-of-Phase 2 meeting with the FDA regarding the pemvidutide Phase 3 obesity program. The company reached an agreement on the design of pivotal studies and the necessary measures for evaluating the drug’s efficacy and safety. This marks a significant step toward advancing the program and moving closer to regulatory approval.
6. AST SpaceMobile, Inc. (NASDAQ:ASTS)
Number of Hedge Fund Holders: 18
Cramer emphasized that AST SpaceMobile, Inc. (NASDAQ:ASTS) is a spec stock and mentioned he doesn’t want it to make up a significant portion of an investment portfolio.
“There’s a whole bunch of stocks that all are very speculative and if people wanna speculate, I am not against it. I just don’t want it to be a large part of your portfolio. This company’s losing money hand over fist. Doesn’t mean the stock can’t go down, but it does mean that it’s not worth anything other than a spec.”
AST (NASDAQ:ASTS) is a company focused on developing a space-based cellular broadband network to provide global mobile connectivity, particularly in areas lacking terrestrial coverage. Despite its ambitious goals, it reported a loss of $171.95 million for the third quarter, which was a significant increase from the $20.91 million loss in the same period the previous year. On a per-share basis, the loss reached $1.10.
Operating expenses also climbed from $58.9 million last year to $66.6 million, driven by higher research and development costs as well as increased expenses for engineering services. However, as Cramer noted in a previous episode, “It’s a space stock, and space is loved right now”, the stock is up over 380% year-to-date. Additionally, the company saw a notable increase in its stock value on December 9 following the announcement of a 10-year commercial agreement with Vodafone, one of Europe’s largest telecommunications companies.
This deal is expected to further expand AST’s (NASDAQ:ASTS) reach, particularly in Africa, where Vodafone has a significant presence. Vodafone has ordered its first BlueBird gateway from the company, allowing users outside cellular coverage to connect smartphones to satellites in low Earth orbit. The gateway will route data into Vodafone’s network, enabling broadband and internet access.
5. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 36
Cramer touched on Ford Motor Company’s (NYSE:F) warranty issues and the company’s disappointing third-quarter results.
“It is a great American company, but it does have warranty problems that I think are gonna come back to haunt it. And I had to sell for the Charitable Trust because it just kept missing the quarter and that’s no way to run a stock. Maybe a car company but not [a] stock.”
Ford (NYSE:F) is involved in the development, production, and servicing of a wide range of vehicles, including trucks, commercial cars, vans, SUVs, and luxury Lincoln models. The company has prioritized addressing its quality issues since 2020. As part of these efforts, it has made changes to its production processes, introducing measures aimed at better identifying errors and allocating additional workers to spot safety concerns.
Despite these efforts, the company has led the industry in recalls since 2021. Warranty costs have continued to weigh heavily on Ford’s earnings this year. In its second-quarter results, the company reported a $800 million increase in warranty expenses compared to the same period in the previous year, mainly due to issues with vehicles launched in 2021 or earlier. During the third quarter, management noted that high warranty costs were affecting the company’s ability to reach record adjusted EBIT for the year.
However, as reported by Reuters, CEO Jim Farley stated that after three years of focused efforts to address all of the company’s deficiencies, the company now has everything in place to improve its quality for both customers and the business. This statement came as the company continues to make progress in its efforts to improve quality.
On December 18, Ford (NYSE:F) confirmed the appointment of a new head of quality, with the change expected to take effect in early 2024. This move is designed to allow Ford’s teams to collaborate more efficiently and deliver vehicles and software with the highest quality for customers.
4. LyondellBasell Industries N.V. (NYSE:LYB)
Number of Hedge Fund Holders: 38
Cramer expressed hesitation about chemical companies like LyondellBasell Industries N.V. (NYSE:LYB) having ‘similarly high yields” and remarked:
“Okay, I can’t say it’s necessarily safe that all the chemical companies have similarly high yields. A lot of them are related to China and China weakness. And I think each one has to be explored on its own and that… if this cycle stays bad and the Fed doesn’t cut rates quickly enough, a lot of these companies may end up to be, let’s say dicier than you’d like to be. How about that? I wanna be polite about it.”
LyondellBasell (NYSE:LYB) is a prominent global player in the production of petrochemicals, polymers, and fuels, serving a broad range of industries. The stock has a yield of 7.18% at the time of writing on December 27, which is up from the 5.62% yield it had when Cramer last talked about it in October.
As discussed in our article, Jim Cramer’s Exclusive List of 9 YEV Stocks, at the time, Cramer noted that the stock, like others in its industry, follows a cyclical pattern, performing well during strong economic periods but struggling during downturns. This cyclical nature explains why the stock has lagged this year due to broader economic challenges. He commented:
“Until very recently, the two largest economies of the world, the United States and China were both deteriorating. But think about what’s happened just in the past few weeks. First, the Fed officially kicked off a new easing cycle, starting with that double rate cut I just mentioned. And then there’s a clear consensus that we are going to get several more rate cuts done before the Fed is finished…
What really matters, though, is that the general direction of interest rates is lower, which means the Fed is your friend. Don’t fight the Fed. At moments like this, the textbook cycle stocks tend to become big winners.”
LyondellBasell (NYSE:LYB) generated $3.4 billion in cash from operations over the past year, with a 77% conversion rate of EBITDA into cash, close to its 80% target. Despite facing challenging market conditions that impacted its third-quarter cash generation, the company expects an improvement in the fourth quarter due to lower global interest rates and economic stimulus measures in China.
Additionally, the company is focusing on profitability through its value enhancement program, expecting to unlock $600 million in recurring annual EBITDA by the end of this year and $400 million in 2024.
3. Agilent Technologies, Inc. (NYSE:A)
Number of Hedge Fund Holders: 44
Discussing Agilent Technologies, Inc. (NYSE:A), Cramer said:
“Finally, how about Agilent Technologies, letter A, a company that provides instruments, software, and services for customers in the life sciences, diagnostics, and applied industrial end markets? This one’s down more than 14% from its 52-week high in May. Agilent’s in the news because the company hosted an analyst day yesterday and from what I hear, they told a pretty good story.”
At its recent analyst day, the company reaffirmed its long-term revenue growth forecast of 5-7%, exceeding market expectations, and slightly raised its operating margin expansion targets (50-100+ bps/yr), indicating potential growth fueled by revenue leverage and strategic initiatives such as Ignite.
The company’s Ignite plan focuses on driving growth through innovation, simplifying processes with a customer-first approach, and improving operational productivity. Furthermore, Cramer also highlighted the company’s recent reorganization. Acknowledging that the analyst day did not lead to much stock activity, Cramer said:
“Now, the analyst day didn’t have much impact on the stock, but I think it was a good reintroduction for this fine company which might have fallen off investors’ radar during this listless period for the life science space.
Again, there’s a good valuation argument for Agilent here. At its peak in September of 2021, the stock sold at 37 times forward earnings. Now it’s trading just under 22 times next year’s earnings estimates, very reasonable valuation. And I have more confidence in the numbers because we just got them from yesterday’s analyst meeting.”
In November, the company announced the new organizational structure to improve collaboration and better align with customer needs. The three business groups include Life Sciences and Diagnostics Markets Group (LDG), representing 38% of revenue, which focuses on pharma, biopharma, clinical, and diagnostics markets.
The Applied Markets Group (AMG), accounting for 20% of revenue, serves industries such as food, environmental, forensics, and chemicals. The Agilent CrossLab Group (ACG), making up 42% of revenue, supports all end markets by strengthening customer connections and providing services, software, and consumables.
2. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 98
Introducing Danaher Corporation (NYSE:DHR), another one of his Charitable Trust’s holdings, Cramer said:
“Full disclosure, this is a name that we have been battling for a few years now. The position was established in early 2022, which was bad timing because I didn’t appreciate the scale of the inventory glut issue. But we stuck with Danaher because we have tremendous respect for the company. I always believed that once the temporary headwinds cleared, this one would bounce right back. It still has a high price-to-earnings multiple though so it got annihilated today, down five bucks or 2% on the poorly received Fed meeting.”
Cramer highlighted that the stock saw a big surge in July but then struggled with a sharp decline in mid-October, dropping 19% from its August high. Despite this, Cramer sees it as a good buying opportunity. He noted that he is not alone in this outlook, as on December 13, Bank of America raised its rating on Danaher (NYSE:DHR) to Buy from Neutral while maintaining a price target of $290.
The firm noted that the recent decline in the stock has made it a more appealing entry point and believes the shares could outperform in 2025 as the bioprocess recovery gains momentum, driven by “more realistic” buy-side expectations. Cramer noted that the firm expects business to normalize next year, with a significant rebound in China driven by government stimulus efforts, and commented:
“There has been no government stimulus in this sector whatsoever. Now, I agree with that recommendation though, which is why we stuck with Danaher for the Charitable Trust. If like me, you believe it, the healthcare sector’s prime for a comeback next year. Danaher’s a great stock.”
Danaher (NYSE:DHR) designs and manufactures a broad range of products and services across several industries, offering solutions for therapeutic development, clinical diagnostics, and laboratory research. In Q3, it faced a decline in high-growth markets, especially in China, due to weak orders and cautious spending. Management noted that despite China’s stimulus measures, they haven’t sparked a notable uptick in orders.
However, the company saw growth from its pharmaceutical, biopharma, and CDMO customers, with demand improving as they moved past inventory destocking. Danaher (NYSE:DHR) management expects this recovery to continue in the coming quarters.
1. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 98
Talking about life sciences equipment and solutions provider, Thermo Fisher Scientific Inc. (NYSE:TMO), Cramer said:
“They make big ticket equipment that these companies need to conduct research, but most of the revenues come from consumables and services for these customers. Regular viewers know that I liked Thermo Fisher for a very long time. It’s been a fabulous performer over the last decade, but it’s struggled ever since the stock peaked at the end of 2021, pulled back hard in 2022…
Now some of this was due to tougher comparisons as Thermo Fisher did great business in 2020 and 2021 as drug companies spent fortunes trying to figure out how to fight Covid. Afterwards, there was an industry-wide inventory glut of their machines because you only need so many in resource labs. Plus, it doesn’t help that we haven’t had many biotech IPOs over the past three years. Normally when biotechs come public, they use the proceeds to buy equipment and materials from companies like Thermo Fisher.”
Cramer noted that while the stock showed improvement in 2023, it fell sharply after a mixed earnings report in October, which included weaker-than-expected revenue and soft guidance for the fourth quarter. He said that the selling continued, exacerbated by a broader healthcare sector decline. However, the one thing that halted the decline was when the company announced a $4 billion buyback program in mid-November, and in early December, revealed that it had already bought back $1 billion of stock.
“I think things will gradually improve for Thermo Fisher with business picking up in 2025 and 2026 and hey, if the IPO market ever comes back to life, there’ll be a new wave of biotech companies coming public and spending their money on life science equipment. Doesn’t hurt that Thermo Fisher now only trades at 22 times next year’s estimate. That’s very low because this is a 30 multiple stock over many years.”
For the third quarter, Thermo Fisher (NYSE:TMO) reported adjusted EPS of $5.28, a decrease from $5.69 in the same period last year, though slightly exceeding expectations. Revenue increased marginally to $10.60 billion, falling short of consensus estimates. The company raised its full-year adjusted EPS guidance to a range of $21.35 to $22.07, up from its previous forecast of $21.29 to $22.07. It also confirmed its revenue guidance of $42.4 billion to $43.3 billion.
While we acknowledge the potential of Thermo Fisher Scientific Inc. (NYSE:TMO) as an investment, our conviction lies in the belief that 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 TMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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