We recently published an article titled, Jim Cramer on Netflix and Other Stocks. In this article, we are going to take a look at where Builders FirstSource, Inc. (NYSE:BLDR) stands against other stocks discussed by Jim Cramer.
Recently, Mad Money’s host, Jim Cramer addressed what he called a “ridiculous plethora of sell-side downgrades,” noting that the Dow Jones Industrial Average fell by 0.94%, the S&P 500 decreased by 0.96%, and the Nasdaq Composite dropped by 1.18% on Monday. While he acknowledged the session’s poor performance, he cautioned that paying too much attention to downgrades can be detrimental for long-term investors.
Cramer urged investors not to get overly influenced by the negative sentiment on Wall Street and emphasized the importance of staying committed to strong companies, even when their stock prices experience volatility. He recounted the history of the bull market, stating:
“When I look at the history of this incredible bull market, and it has been an incredible bull market, it’s littered with buy-to-hold, hold-to-sell, buy-to-hold, hold-to-sell. These downgrades scare you out of amazing stocks at levels that may temporarily be too high, but will recover later. If you listen to the downgrades, though, you’ll never recover with it.”
In discussing the challenges investors face, Cramer pointed out that many get rattled by analyst downgrades and might sell their shares in solid companies, which can make it difficult to buy back in later.
“In the last decade, the toughest thing to do is to hold on to good stocks. But analysts and commentators love to take aim at big long-term winners. Their jeremiads have scared so many people out of some amazing gains.”
He observed that complacency can be prevalent on Wall Street, with bullish investors often overlooking risks while bearish ones miss out on potential opportunities. For those considering action based on a downgrade, Cramer advised waiting for a bounce to sell, but he noted that timing such moves is “incredibly hard,” even for seasoned traders.
Cramer emphasized that when analysts downgrade stocks that have already taken a hit and overlook positive aspects, it can create a challenging environment. However, he believes it is still possible to profit. Here’s what he said:
“I need you to understand that when analysts downgrade after stocks have already been hammered, when really good investors ignore the positives, then, it may be a grim time. But not so grim that we can’t make money by focusing on the fundamentals of the companies. And not just the economy, the Fed, interest rates and oil.”
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during his episodes of Mad Money on October 7 and October 8. 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).
Cramer On Builders FirstSource, Inc. (NYSE:BLDR): ‘I Like The Company’
Builders FirstSource, Inc. (NYSE:BLDR)
Number of Hedge Fund Holders: 59
Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials and construction services across the United States. Its extensive product line features manufactured components that play a vital role in various construction projects. Discussing the company, Cramer talked about hurricanes leading to renovation and remodeling and said:
“Builders First Source has some of that… The stock’s up a great deal. I like the company. It sells at 16 times earnings. It’s good.”
In the second quarter, Builders FirstSource (NYSE:BLDR) completed nearly $1 billion worth of share repurchases. Following this, in August, the company authorized an additional repurchase of up to $1 billion of its outstanding common stock. Since initiating the buyback program in August 2021, it has successfully repurchased approximately 93 million shares, representing 45% of its total shares outstanding, with an average purchase price of $76.65 per share, amounting to a total expenditure of about $7.1 billion.
For the full year of 2024, Builders FirstSource (NYSE:BLDR) forecasts net sales to fall between $16.4 billion and $17.2 billion. The company expects to maintain a gross profit margin ranging from 31.5% to 32.5%. This projected performance is grounded in several assumptions regarding market conditions.
Within its operational regions, single-family housing starts are expected to see a modest increase in the low single digits, while multi-family starts are predicted to decline by 25% to 30%. The company also forecasts that its remodeling and repair segment will remain flat compared to the previous year. Additionally, recent acquisitions completed within the past twelve months are anticipated to contribute an incremental net sales growth of 1.5% to 2.0%.
ClearBridge Investments stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q3 2024 investor letter:
“The Strategy has historically been underweight industrials and consumer discretionary sectors, but positioning moves over the last year have helped close these gaps and provided several new contributors this quarter. Builders FirstSource, Inc. (NYSE:BLDR), a supplier of building products, rose strongly in the quarter on optimism that rate cuts will improve demand for single family and eventually multifamily residential construction. Cintas, a uniform rental and facilities services company, put up solid results as cross-selling and margin expansion efforts continue to bear fruit. Starbucks also provided a lift as the stock reacted positively to the naming of a new CEO, industry veteran Brian Niccol, who is expected to reinvigorate operations.”
Overall, BLDR ranks 9th on our list of stocks discussed by Jim Cramer. While we acknowledge the potential of BLDR 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 BLDR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
