As earnings season kicks off, Jim Cramer of Mad Money offered insights on what investors should watch in the coming week on Wall Street. He highlighted the anticipated reports from several major banks, along with a few other companies, as key events to monitor.
Cramer expressed optimism about the current market conditions, noting that the situation aligns with his previous predictions that the market would thrive once the Federal Reserve began reducing interest rates while the economy remained strong. He remarked on the spectacular earnings reported by some major banks on Friday, emphasizing that this positive news is particularly impactful now, as opposed to previous instances when the Fed was tightening, causing good news to go largely unnoticed. Cramer believes that with the Fed now supportive of the market, there is potential for more favorable times ahead.
Looking to Monday, Cramer predicted that the focus will shift away from earnings reports due to other significant developments over the weekend. He mentioned the anticipated unveiling of a Chinese stimulus package and noted that although the rally in China has stalled, it could regain momentum if the Chinese government injects substantial funds into real estate and the stock market.
“Now, on Monday, we won’t be focused on earnings. There’s a lot of other stuff happening over the weekend. For instance, I think we’ll be parsing the Chinese stimulus package that’s going to be unveiled. The China rally is stalled, but it can get rolling again if the Chinese Communist Party keeps throwing tens of billions of dollars for the stimulus at real estate, at the stock market.”
Cramer warned that the financial sector will face a significant test on Tuesday, as different banks will be reporting their earnings. Cramer reminded investors that we are just at the beginning of one of the year’s four reporting periods, which can be chaotic and open to various interpretations.
“We’re at the beginning of one of the year’s four reporting periods,” he said. “They’re jumbled. They’re open to a lot of interpretation. They’re fast. So listen to the calls, ponder a moment, and only then should you pull the trigger.”
Cramer is Talking About These 14 Stocks Before Earnings
Our Methodology
For this article, we compiled a list of 14 stocks that are slated to release earnings this week and were discussed by Cramer during his episode of Mad Money on October 11. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 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).
Jim Cramer is Talking About These 14 Stocks Before Earnings
14. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 35
Cramer predicted that Walgreens Boots Alliance, Inc.’s (NASDAQ:WBA) numbers for the upcoming quarter will not be great. He commented:
“We probably won’t like what we see when we get the numbers from Walgreens, though. But the bar’s so low at this drugstore that maybe it won’t even matter. Yeah, it’s been that bad.”
Walgreens Boots Alliance (NASDAQ:WBA), a prominent name in the retail pharmacy sector, has a rich history spanning 170 years of service to communities worldwide. With over 12,500 locations across the United States, Europe, and Latin America, the company connects with millions of customers and patients daily. Its diverse portfolio includes well-known brands such as Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico, as well as healthcare-focused investments in various countries, including China and the U.S.
Despite its extensive network and brand recognition, Walgreens Boots Alliance (NASDAQ:WBA) faces significant challenges, particularly concerning drug reimbursement pressures. The impact of pharmacy benefit managers (PBMs) has created a difficult environment for pharmacies, sometimes resulting in losses when filling prescriptions, including those for popular GLP-1 weight-loss medications.
Additionally, as a result of an effort to expand into primary care services, the company encountered setbacks with its joint venture with Cigna, known as VillageMD, which resulted in a $12.4 billion impairment charge earlier this year.
To address ongoing financial pressures and improve profitability, the company is implementing a turnaround strategy that includes closing a considerable number of store locations in the coming years. The company has identified that nearly 25% of its stores are unprofitable and plans to focus on consolidating locations that are too close to one another, are not financially viable, or are struggling with theft issues.
13. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 62
Cramer said that Morgan Stanley (NYSE:MS) stock was troublesome for some time but since the new CEO stepped in, buyers have been inching in.
“Morgan Stanley was a real headache for a while as the bears kept tearing apart their wealth management business. Not anymore, though. Ever since Ted Pick came in as CEO at the beginning of the year, we’ve seen buyers swarm in on any weakness. Stock’s had a big run, but you know what? It still yields 3.3%. I say hold on for the ride.”
Morgan Stanley (NYSE:MS) provides a range of financial products and services, ranging from capital raising and financial advisory to brokerage and investment management. In January, Ted Pick, a seasoned executive with over thirty years of experience at the company, succeeded James Gorman as chief executive officer. Pick has articulated a clear focus for the organization, emphasizing continuity in the strategic direction set by his predecessor. He has previously said that he seeks to uphold the bank’s established culture while striving to meet ambitious financial objectives, including a target of $10 trillion in client assets and a 20% return on equity.
On October 4, HSBC upgraded Morgan Stanley (NYSE:MS) to Buy from Hold with a price target of $118, up from $103. Analysts at HSBC suggest that the prolonged period of underperformance in the stock may be nearing its end. They cite the strength of its investment banking and wealth management divisions as factors that are likely to benefit from favorable market conditions, which should improve the firm’s financial results.
Moreover, concerns regarding net interest income have been viewed as exaggerated, especially in light of the company’s fee-based asset flows and the growth of management fees within its wealth management sector.