We recently published a list of Jim Cramer Latest Portfolio: 10 Stocks to Buy and Sell. Since Trane Technologies plc (NYSE:TT) ranks 3rd on the list, it deserves a deeper look.
Jim Cramer in his latest program talked about how the China factor is affecting US stocks. He said that companies that have exposure to China are getting hammered and he does not see that changing “anytime soon.”
Cramer said that currently there are many “pernicious forces working against the bulls.” The CNBC host said many growth stocks are declining right when interest rates are around the corner. He said that companies that don’t benefit from rate cuts are going down. Cramer also mentioned weak earnings reports which show companies having challenged client bases. Cramer mentioned a consumer products company that was recently hammered because of weakness in China.
Cramer thinks the problem in China is twofold: there’s a government that does not like America or American businesses while the population is “cash-strapped” even if they “like our country.”
Cramer said “China is so darn complicated.” He said at one point the Chinese government was “so business friendly” that Western companies thought it’s “insane” not to go there. But since the Trump administration, the country has been engaged in trade wars with the US.
Cramer said the Chinese government “took advantage of us on trade.”
For this article we watched several latest programs of Jim Cramer and picked 10 important stocks he’s talking about. With each stock we have mentioned its hedge fund sentiment. 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).
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Trane Technologies PLC (NYSE:TT)
Number of Hedge Fund Investors: 46
When asked about Trane Technologies, Cramer hit the “buy, buy, buy” button and said:
“Hard to stop a Trane…Trane is for real.”
Trane Technologies PLC (NYSE:TT) is a manufacturing company focusing on heating, ventilation, air conditioning and refrigeration systems. The stock is already up 67% over the past year. The company has benefitted heavily amid demand increases for energy efficiency, decarbonization, and digital transformation solutions, in addition to pricing tailwinds. This growth helped the company offset declines in residential and transportation end markets in 2023. Trane Technologies PLC (NYSE:TT) still has a strong backlog and its data center investments are expected to bear fruit. It’s positioned to benefit from the data center market because it provides cooling solutions, something that’s direly needed for data centers. Trane Technologies PLC (NYSE:TT) management talked in detail about the data center opportunity during Q1 earnings call:
“We talked a little bit about data centers earlier. But look, this is a vertical that tends to move faster from a technology adoption than others. And we’re working closely with partners and data center customers to understand what the trends are and I would tell you, we’re right in the middle of it. In the data center, Andrew, look at the entire system, okay? We like to look at things at a system level. And you’re hearing a lot right now on the terminal side of data center. So that would be like direct cooling to the chip or immersion cooling. We look at the entire system. So the air handling side of it as well as the sophisticated chillers, the high-efficiency chillers with next-gen refrigerants that are also required.
I think where you’re going to hear a little bit more is on the thermal management side of a data center. They produce a lot of heat that heat is taken out of the data center, how can you repurpose it. And that’s some of the technology that we’re in discussions, kind of at a thought leadership level as to how we can take an asset and — or heat and turn it into an asset in the future.
However, Trane Technologies PLC (NYSE:TT) valuation has been a concern for investors. The stock’s forward P/E of 32 is high when compared with the industry median of 19. Over the past five years its P/E has been around 25.69x. Currently, its P/E on FY24 and FY25 consensus EPS estimates are 31.27x and 27.85x, respectively. These valuation metrics do not show any decent discount.
NZS Capital stated the following regarding Trane Technologies plc (NYSE:TT) in its fourth quarter 2023 investor letter:
“We had no major shifts in our portfolio positioning, but what changes we made stemmed from stock-specific opportunities. We remain highly exposed to information technology given our focus on innovation and disruption, but we are increasingly finding opportunities in other sectors. For example, we shifted Trane Technologies plc (NYSE:TT) into our resiliency sleeve. Trane, which we discuss in greater detail below, is a leader in HVAC, an attractive industry aligned with decarbonization.
Our disciplined approach considers two types of stocks: resilient and optional. In both cases, we consider a broad range of outcomes. Rather than making one prediction and investing behind it, we consider the range of scenarios that provide a favorable return. A stock with a broader range of outcomes, and thus more uncertainty, is considered optional and remains less than 1.5% typically. A company with a narrower range of outcomes gives us more confidence and can fit in the resilient sleeve, which typically includes positions sizes from 2.5% positions to 6% of the portfolio
Overall, Trane Technologies plc (NYSE:TT) ranks 3rd on Insider Monkey’s list titled Jim Cramer Latest Portfolio: 10 Stocks to Buy and Sell. While we acknowledge the potential of Trane Technologies plc (NYSE:TT) 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 TT 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.