In this article, we will take a look at the Jim Cramer’s 5 best of breed stocks. To see more such companies, go directly to Jim Cramer’s 14 Best of Breed Stocks.
5. Advanced Micro Devices Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 112
Advanced Micro Devices, Inc. (NASDAQ:AMD) was one of the tech stocks Jim Cramer labeled best of breed last year. He said that these companies were seeing selloff without any justified reasons and predicted that these companies would rebound soon.
Over the past one year Advanced Micro Devices, Inc. (NASDAQ:AMD) shares have gained about 83% over the past one year, so Jim Cramer was right about this stock.
Artisan Global Opportunities Fund made the following comment about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2023 investor letter:
“Among our top contributors were Advanced Micro Devices, Inc. (NASDAQ:AMD), NU Holdings and Netflix. AMD’s data center CPUs are used in the cloud service provider (CSP) servers. In addition to the broader secular tailwind from cloud adoption, the company has a performance and pricing advantage over Intel, which we believe will enable it to continue capturing market share. However, the recent stock price rally was due to growing excitement around the company’s AI exposure. It will launch its new MI300 graphics processing unit (GPU) chip later this year to compete against the dominant market leader NVIDIA. Similar to its approach that won market share from Intel within the CPU market, AMD’s product will aim to provide similar performance at a more attractive price. AMD is already working with Microsoft and Meta, while Amazon publicly stated that it is evaluating AMD’s inferencing chips. Using assumptions around the total GPU market size, potential market share gains and price points, our research indicates this could be a $20 billion opportunity for AMD. That would nearly double its revenue. While the company has not historically missed many deadlines, there is execution risk as it works to manufacture and distribute these complex chips at scale, which, combined with an elevated valuation after the stock’s strong performance run, led us to trim the position.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 175
Jim Cramer said earlier this year that NVIDIA Corporation (NASDAQ:NVDA) stock may appear expensive but it still continues to go higher and higher with occasional dips. That’s because NVIDIA Corporation (NASDAQ:NVDA) is a best of breed stock, Cramer said. Cramer has been talking about the AI hype companies generate to prop up their stock prices. The fact that he believes NVIDIA Corporation (NASDAQ:NVDA) is a best of breed stock shows the analyst truly believes in the AI story of the semiconductor company.
Insider Monkey’s database of 910 hedge funds shows that 175 hedge funds reported owning stakes in NVIDIA Corporation (NASDAQ:NVDA) as of the end of the second quarter of 2023.
Artisan Developing World Fund made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2023 investor letter:
“Our focus on scalable business models has its roots in our economic framework. As potential output moderated in most emerging countries, it became clear to us affordability was not improving and that low penetration was necessary but not sufficient for value creation. We eliminated companies from the portfolio that were struggling to generate revenue significantly in excess of fixed costs, often replacing them with passport companies such as NVIDIA Corporation (NASDAQ:NVDA) and Airbnb that were economically tied to emerging markets. Over a period of time, we have been successful in redefining the emerging markets opportunity set around real per capita GDP increases, growth in the middle class, revenue velocity and demand fulfilment. Combined with changes in the market backdrop that have resulted in privileged competitive positions for companies with financial strength and access to capital, we find our opportunity set expanding anew to include companies that are both based in emerging markets and conducive to value creation.”
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 204
Last year, Jim Cramer mentioned Alphabet Inc. (NASDAQ:GOOG) among some other tech names and called these companies best of breed. The analyst said that companies like Alphabet Inc. (NASDAQ:GOOG) tend to bottom before any other company during a market rotation towards tech. Cramer also wondered why Alphabet Inc. (NASDAQ:GOOG) shares, along with other companies, were tanking despite the firms’ posting strong earnings.
Cramer was right. Over the past one year Alphabet Inc. (NASDAQ:GOOG) shares have gained about 40%. Analysts and investors are excited about the company’s AI prospects.
Insider Monkey’s database of 910 hedge funds shows that 204 hedge funds had stakes in Alphabet Inc. (NASDAQ:GOOG) as of the end of the second quarter.
Wedgewood Partners made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) was a top contributor to performance as search revenues accelerated during their second quarter. This improved performance flies in the face of fears that demand for the Company’s advertising inventory and core search functionality would be diluted by the Company’s own generative-AI offerings and outside substitutes. Alphabet subsidiaries have been at the vanguard of artificial intelligence for more than a decade. The Company has spent almost $150 billion on research and development over just the past five years, and today over 80% of the Company’s advertising customers use an AI-enabled tool when they run their Google Search and YouTube campaigns. Thus, Alphabet is certainly not “behind the curve” in any way, shape, or form when it comes to AI. Quite the contrary, the Company has ample room to rationalize spending to drive better returns on investments and increase capital returns to shareholders at these relatively attractive forward earnings multiples.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 278
Jim Cramer believes Amazon is a best of breed stock in the retail industry because of Amazon.com, Inc. (NASDAQ:AMZN)’s Prime service and cheap prices. Cramer said that Amazon.com, Inc. (NASDAQ:AMZN)’s quick delivery service is changing consumers’ habits in the US as instead of going to a Walmart or CVS store they can get the product they want delivered quickly at their doorstep using Amazon Prime, often at a cheaper price.
“I wish I could tell you to buy the beaten-down retailers, but the one thing I know is that buying best of breed is the way to go, and at this stage in the retail world, there are only three best-of-breed general merchants, and they are Walmart, Costco and Amazon,” Cramer said.
White Falcon Capital Management made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2023 investor letter:
“There are comparable narratives involving NU Holdings, Amazon.com, Inc. (NASDAQ:AMZN), and Teck Resources, to name a few holdings from the White Falcon portfolio. Amazon constructed its logistics network and cloud computing infrastructure using yesterday’s currency, but it is poised to capitalize on this network with the inflated dollars of tomorrow. In essence, we believe we hold wonderful businesses with growing revenue streams and potential for operating leverage – all at reasonable valuations.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 300
Jim Cramer last year labeled Microsoft Corporation (NASDAQ:MSFT) one of the best of breed stocks. Cramer was talking about how major tech companies like Microsoft Corporation (NASDAQ:MSFT) are the first to find bottom during market rotation. He said that he’s studied these stocks for four decades and found out that when these high multiple stocks begin to see sell-off, the fall lasts for just three days from the start.
Insider Monkey’s proprietary database of 910 hedge funds shows that 300 hedge funds had stakes in Microsoft Corporation (NASDAQ:MSFT) as of the end of the second quarter of 2023.
ClearBridge Value Equity Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2023 investor letter:
“We initiated a small position in Microsoft Corporation (NASDAQ:MSFT) during the quarter, which may seem surprising given our concerns about index concentration. However, we seized the opportunity on a compelling entry point below our business value estimate, due to an anticipated acceleration of demand for Microsoft’s Azure cloud business and incremental revenues from integration of Microsoft’s AI Copilot program into its office platform. We believe this could support double-digit growth, while simultaneously solidifying Microsoft’s competitive position as an AI winner. Even as a small position, we believe Microsoft provides a large portfolio construction benefit given low correlation to the rest of the portfolio.”
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