We recently published a list of Jim Cramer Says Buy These 5 Industrial Stocks Before Rate Cuts — And 5 Other Stocks He’s Talking About. Since Dover Corp (NYSE:DOV) ranks 10th on the list, it deserves a deeper look.
Jim Cramer said in a latest program on CNBC that the NASDAQ has become an “annoying source of funds” for other indexes as mutual funds pull out of tech and growth stocks that would not benefit from rate cuts and funnel these funds into the companies that can “super-charge” their earnings amid the expected rate cuts in September.
Cramer said that the decline of tech stocks could be “painful” for many because while these companies do not benefit from rate cuts, their earnings are still strong. Cramer said there are two kinds of companies that will benefit from rate cuts: the ones with cyclical businesses that thrive during rate cuts and those with high dividend yields.
Cramer said that by the time the Fed would announce its first rate cuts, it would have been “too late” to buy the stocks that benefit from rate cuts.
“You have to let them recharge, let them come down and then you can pull the trigger,” Cramer said.
In a separate program a few days ago Jim Cramer specifically talked about five industrial stocks he’s bullish on before rate cuts. In this article we mentioned these five stocks along with a few other stocks Cramer is talking about during his programs these days. With each company 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).
A modern industrial equipment assembly line in motion.
Dover Corp (NYSE:DOV)
Number of Hedge Fund Investors: 28
Jim Cramer said in a program on CNBC that Dover Corp (NYSE:DOV) used to be a “classic metal bender” but it has transitioned to become a less cyclical company which is why he owns the stock for his charitable trust.
“I am proud of this one. I think it’s gonna have a big run. The new Dover now sells into some of the best secular growth themes of our era. Think lower emissions, refrigeration cooling systems, think heat exchangers and thermal connectors. Think data centers.”
Cramer said that the stock has been trading “sideways” since March despite reporting two stronger-than-expected quarters consecutively.
“I think the market is underestimating Dover Corp (NYSE:DOV), hence why we’re building our position for the charitable trust.” Cramer added.
Dover Corp’s (NYSE:DOV) business offers products and services via five segments: engineered products, clean energy & fueling, imaging & identification, pumps & process solutions and climate & sustainability technologies. Each segment’s revenue is over $1 billion on an annual basis. In 2023 the company’s full-year free cash flow came in at $1.1 billion, nearly double the previous year’s figure. This increase was due to effective working capital management and reduced capital expenditures. The free cash flow conversion rate has risen above 90%.
What makes Dover Corp (NYSE:DOV) a promising data center stock? The company talked about that during its latest earnings call:
We are also benefiting from our exposure to data centers and the secular growth in infrastructure investment with the significant power requirements of next generation chips that support artificial intelligence adoption are now requiring liquid cooling methods. We are exposed to liquid cooling of data centers in both our heat exchanger business, which enables heat transfer within the coolant distribution units and in the connector business which provides leak free liquid connection points at the server racks and manifolds and now directly to the individual chip cooling cold plates. I’ll leave the data center infrastructure market forecast to our end customers further down the chain. For us, it’s clearly an area of robust growth in the foreseeable future as evidenced by our recent order trajectory and high profile specification wins with the chip OEMs. Importantly, we have proactively installed production capacity and are well positioned to meet any meaningful inflections in demand with industry best lead times.
Dover Corp (NYSE:DOV) has an astonishing dividend growth history, with over 50 straight years of dividend hikes.
Wall Street expects the Dover Corp (NYSE:DOV) earnings to grow 9.20% next year, while the average analyst price estimate on the stock is $195, about 6% higher than the current stock price. The stock’s forward P/E ratio of 20 looks attractive based on these factors.
Overall, Dover Corp (NYSE:DOV) ranks 10th on Insider Monkey’s list titled Jim Cramer Says Buy These 5 Industrial Stocks Before Rate Cuts — And 5 Other Stocks He’s Talking About. While we acknowledge the potential of Dover Corp (NYSE:DOV), 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 DOV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
