We recently published a list of Jim Cramer Stocks: 10 Latest Calls. Since Southwest Airlines Co (NYSE:LUV) ranks 9th on the list, it deserves a deeper look.
Jim Cramer in a new program on CNBC talked about the latest pullback on Tuesday, when the market snapped its 8-day winning streak. Cramer said that the hopes of rate cuts were buoying the markets all along. According to Cramer, when a company posted a good quarter, its stock roared. If a company reported a bad quarter, investors assumed it was the “last bad quarter” because the Fed was about to start cutting rates.
“In other words, companies could do no wrong. But not today. Today we had a bit of a reckoning and dose of reality being thrown in our faces.”
Cramer talked about two home improvement companies that recently reported their quarters. According to Cramer, these results show that the consumer is still extremely cautious, and high mortgage rates and inflation is keeping spending on big-ticket items depressed.
“Wall Street is maybe expecting not good news from the Fed on Friday and therefore a slowdown, a bad slowdown,” Cramer said.
Jim Cramer said the market is “rational” again and the optimism needed to be “tempered” before the next rally.
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s recommending investors to buy or sell. 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).
Southwest Airlines Co (NYSE:LUV)
Number of Hedge Fund Investors: 23
Jim Cramer said in a latest program that Paul Singer’s Elliott Management’s nominees for Southwest board are exactly what the company needs to improve its performance.
“On the other hand, if left to its own devices, I bet Southwest will keep going lower. There’s still time for the board to accept their lack of diligence and move on with their heads high, but I am definitely betting on Elliott here since his people are better and they will get a better CEO,” Cramer said.
Southwest Airlines Co (NYSE:LUV) is trending after billionaire Paul Singer’s Elliott Management opened a $2 billion stake in the company and demanded 10 board seats. The hedge fund believes the stock has the potential to reach $49. But Elliott’s battle would be long and hard as Southwest Airlines Co (NYSE:LUV) faces both external and internal issues.
Southwest Airlines Co (NYSE:LUV) management acknowledges the need for change but believes the company’s strong balance sheet positions it well to weather these challenges. The airline has been adapting to shifts in the market, including offering more medium and long-haul flights and maintaining its efficiency edge over competitors, despite facing similar operational costs. Southwest’s strong employee relationships and ongoing adjustments to its business model reflect its commitment to maintaining profitability.
As Southwest Airlines Co (NYSE:LUV) looks to the future, it’s expected to target growth in its home market of North Texas. With legal restrictions set to lift next year, Southwest may expand operations to other regional airports, possibly even Dallas/Fort Worth International Airport (DFW), where it has long faced competition from American Airlines. Despite the hurdles, Southwest Airlines Co (NYSE:LUV) is poised to adapt and grow in the evolving airline landscape.
Overall, Southwest Airlines Co (NYSE:LUV) ranks 9th on Insider Monkey’s list titled Jim Cramer Stocks: 10 Latest Calls. While we acknowledge the potential of Southwest Airlines Co (NYSE:LUV), 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 LUV 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.