We recently compiled a list of the Jim Cramer’s Bold Predictions About These 10 Industrial Stocks. In this article, we are going to take a look at where Southwest Airlines Co. (NYSE:LUV) stands against the other industrial stocks.
As 2024 comes to an end, the flagship S&P index is up by 25.9% year to date, driven primarily by technology stocks and investors rushing to pile into artificial intelligence. Additionally, as opposed to earlier worries of a recession, the US GDP has continued to grow as well. According to the Bureau of Economic Analysis (BEA), America’s economy grew by 3.1% in Q3. According to the IMF, the US GDP is projected to grow by 2.8% in 2024 and stand out from most of the developed world and China.
Yet, while technology stocks and the industry are eye-catching, they are not the only components of the economy. In 2024, while the overall economy has grown, some sectors haven’t done well. One sector that’s often perceived to be the pulse of the economy is the industrial sector. It measures output from large-scale plants, and in today’s era of high interest rates, industrial stocks haven’t done too well.
For instance, while the broader S&P is up 25.9%, its industrial component has managed to post 16.94% in gains this year. The sluggishness in the industrial sector hasn’t gone unnoticed by Jim Cramer either. On the day the Federal Reserve cut interest rates by 25 basis points but reduced 2025’s projected rate cuts to two from an earlier four, Cramer commented on the state of the American economy ahead of the Fed’s announcement.
He outlined the need to look at other sectors apart from technology. “Look at the material stocks, look at anything related to industrial export. Look at the housing stocks,” said Cramer, adding “There are cohorts that are indeed rolling over. It isn’t like everything is just super strong and everything is quantum computing and Rocket Lab!” Cramer wondered why the Fed was cutting rates at all since the economy appeared to be quite robust. He stressed the need to sift through the data to find out the real state of the economy. According to Cramer, “So I think that the talking heads, and boy are there ever a lot of talking heads, have decided that if you look at what we’re seeing in some retailers, things are strong. By the way in retail, it’s not strong either if you count colds.”
The CNBC host wasn’t convinced by the Atlanta Fed’s estimate of the US GDP growing by 3.2% in Q4. He stated that he was “trying to find why. I’m trying to find where that is. You know David that travel’s very strong yeah. Leisure’s very strong. Dining out’s very strong. These are strong and by the way, they’re very obvious, they look obvious to the Atlanta Fed. I don’t know what kind of weighting they have but wow.”
Another sector that’s representative of the broader economy and ties closely with industrial stocks is the automobile sector. Automotive firms often depend on the outputs of industrial firms, and if the industry is slow then industrial firms also face a demand slowdown. America’s two biggest auto manufacturers, the firms behind the F-150 truck and the company developing the Cruise autonomous driving system, have both struggled in the stock market in 2024. The former’s stock is down 17.5% year-to-date and the latter was up by a mere 10.5% by early August when investors were more uncertain about the economic outlook. Similarly, Elon Musk’s car company had gained just 1.22% ahead of the election as its EV business continued to struggle with competition overseas and slow sales in the US.
Cramer also commented on the trouble that the automotive sector is facing during the program. He was perplexed as to why “the problems with autos are not so visible among the cognoscenti.” It’s important to dig deeper into the automobile industry since it “is a huge industry. Employs a lot of people. And the layoffs and the ramifications of what could happen here and other mergers,” Cramer commented.
Our Methodology
To compile our list of Jim Cramer’s bold predictions about industrial stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out industrial and materials stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? 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 commercial Boeing 737 aircraft flying in the sky with the well-known SWABIZ logo on it.
Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders In Q3 2024: 36
Date of Cramer’s Comments: 8-15-24
Performance Since Then: 28.26%
Southwest Airlines Co. (NYSE:LUV) is one of the biggest airlines in the US due to the 817 aircraft in its fleet. The firm’s narrative in 2024 has been driven by its strategy to grow revenue from existing passengers, increase fleet utilization through redeye flights, launch vacation packages, and develop partnerships with international airlines. Higher fleet utilization is essential for Southwest Airlines Co. (NYSE:LUV) to succeed since the firm has been hit heavily by Boeing’s delayed aircraft deliveries. However, the second half of the year has been kind to the stock. Southwest Airlines Co. (NYSE:LUV)’s shares with multiple catalysts such as the settlement of a lawsuit from an activist investor and the closure of an AA investigation driving the shares. Here’s what Cramer said about Southwest Airlines Co. (NYSE:LUV) in August:
“We saw the potential directors from the activist investor Elliott; they want to bring in people to replace ten on the board. Everything would change if they do that. Every one of Elliott’s nominees excels in the fields Southwest needs—technology, revenue management, safety, government. On the other hand, if left to its own devices, I bet Southwest would keep it 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 because his people are better, and they will get a better CEO. Valuable franchises it is hard to destroy no matter how hard you try. You just need the right team, and it’s a winner. You need a change agent as CEO, not just as director. In the case of Southwest, maybe you do need to change up the whole board.”
Overall LUV ranks 6th on our list of the industrial stocks Jim Cramer recently talked about. While we acknowledge the potential of LUV as an investment, our conviction lies in the belief that some 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.