In this article, we will take a detailed look at Jim Cramer Latest Lightning Round: Top 10 Stocks to Watch.
Jim Cramer in a latest program on CNBC talked about the latest rebound in the market.
“Never get tired of all-time highs. We are experiencing a time for the market which is what I said would happen when the Fed starts cutting rates when the economy is still solid.”
Cramer said that the key reason the market roared to highs was strong earnings from top banks. He said since the Fed’s interest rate cuts have just started, investors believe maybe the “best is yet to come.”
Jim Cramer wondered whether this strong performance trend would be a “pattern” in this earnings season.
“We will find out soon enough. We will see if the positive action will be sustained.”
Cramer recommended investors to “listen to the calls” this earning season and “ponder a moment, and only then should you pull the trigger.”
“We are at the beginning of one of the year’s four reporting periods. Probably the most exciting. I can’t believe I still get fired up, but man, am I ever.”
For this article, we watched the latest episodes of Jim Cramer’s ‘Lightning Round’ segment on CNBC and picked 10 stocks he was talking about. With each company, 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).
10. Fulton Financial Corp (NASDAQ:FULT)
Number of Hedge Fund Investors: 13
Talking about Fulton Financial Corp (NASDAQ:FULT), Cramer highlighted that the company bought a regional bank in Philadelphia.
“I think it’s a good one. I wish it had a 4% yield. I’d feel better about it.”
Fulton Financial Corp (NASDAQ:FULT)’s performance has shown significant growth over the past year. At the end of last year, Fulton Financial Corp (NASDAQ:FULT) had $21.54 billion in deposits, which increased to $25.56 billion by the end of the most recent quarter. The value of loans also rose during this period, going from $21.06 billion to $23.73 billion. The value of securities expanded from $3.67 billion to $4.18 billion. Fulton Financial Corp (NASDAQ:FULT)’s cash and cash equivalents saw a notable increase, rising from $674.1 million to $1.40 billion. On the debt front, Fulton Financial made progress as well, with its total debt decreasing from $2.49 billion at the end of last year to $2.18 billion by the end of the most recent quarter.
In late April of this year, management announced the acquisition of “substantially all” of the assets and the assumption of “substantially all” of the deposits of Republic First Bank, which had been under the control of the FDIC. This acquisition added approximately $3.8 billion to the company’s deposits, with 47% of those deposits being interest-bearing demand deposits.
9. Affirm Holdings Inc (NASDAQ:AFRM)
Number of Hedge Fund Investors: 34
A caller recently asked Jim Cramer about Affirm Holdings Inc (NASDAQ:AFRM). Here is what he said:
“A lot of people feel it’s related to rates. I think it’s related to the honest ability to be able to judge people’s credit, give them credit, and then watch and see how well they do. Buy now, pay later, Max (Affirm CEO) loves it. I had Max on. I truly enjoy Max. I get along with him. I have to admit I’ve done some charitable stuff in his orientation. And all I can tell you is that I think he’s good to go. I like the stock very much.”
Affirm Holdings Inc (NASDAQ:AFRM) is a key player in the Buy Now Pay Later (BNPL) market. Wells Fargo recently upgraded it from Equal-weight to Overweight. While still considered expensive for a start-up that is not yet profitable, there have been notable improvements in cash flow and adjusted operating margins, making the current price attractive for buyers. Wall Street expects Affirm Holdings Inc (NASDAQ:AFRM)’s revenue to grow about 30% in FY2025 and at a 3-year revenue CAGR of 25% through FY2027.
The stock’s price-to-sales (P/S) ratio stands at 4.9, which is fairly reasonable considering the expected 30% revenue growth in FY2025. Additionally, the P/S to Growth ratio is just 0.2, indicating a low valuation for a company with strong growth potential.
8. Boeing Co (NYSE:BA)
Number of Hedge Fund Investors: 42
When asked about Boeing Co (NYSE:BA) in a latest program on CNBC, Cramer said that he’s “worried” about the company.
“Let me tell you why I’m worried. Because the balance sheet is not great. They should have raised capital when they had a chance to. It was jarring news, and I don’t have any conviction whatsoever that they are getting this right.”
Jim Cramer was previously bullish on Boeing Co (NYSE:BA). Why? The new CEO was the main reason.
Kelly Ortberg has a degree in Mechanical Engineering, and brings a technical background to the role, a shift from the accounting-focused leadership that investors have found concerning.
Boeing Co (NYSE:BA) is also increasing production rates, having already increased output and reactivated its third 737 MAX assembly line. The company has submitted a comprehensive plan to the FAA, aiming to surpass the current cap of 38 MAX airplanes per month. While these measures will not immediately impact earnings, they signal Boeing Co (NYSE:BA)’s commitment to sustainable growth.
On the certification front, Boeing Co (NYSE:BA) is progressing with solutions for the 737 MAX 7 and MAX 10, and has entered a new phase in the 777X certification campaign. These developments are seen as positive.
Boeing Co (NYSE:BA) has made progress with the 737 MAX program. Boeing Co (NYSE:BA) has reduced traveled work, leading to cleaner fuselages and improved quality and reliability. Boeing’s submission of a comprehensive safety and quality plan to the FAA marks an important milestone. Production has increased from a low single-digit rate in the first quarter to 25 airplanes per month in June and July, though still short of the target of 38 airplanes per month by year-end. This increase suggests progress in managing manufacturing quality.
However, with worker strikes ongoing and credit ratings in danger, Boeing Co (NYSE:BA)’s journey back to normality will be long and hard.
7. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Investors: 48
Talking about Royal Caribbean Cruises Ltd. (NYSE:RCL) in a latest program on CNBC, Jim Cramer said:
“Royal Caribbean. Cruises are a tremendous bargain whereas hotels and other forms of entertainment have gotten to be too expensive. Bookings are explosive. You can still buy the stock.”
Royal Caribbean Cruises Ltd (NYSE:RCL) is benefitting from strong demand from younger customers as people around the world continue to spend on experiences despite inflation. Secular growth trends are expected to keep boosting the company. The global cruise passenger numbers hit 31.7 million last year, a 7% increase over pre-pandemic levels. Projections suggest this figure could approach 40 million by 2027, highlighting the robust demand for cruise vacations.
Amid the after-effects of the pandemic, cruise companies have been reluctant when it comes to expansion of capacity and new orders. This resulted in a shortage of ships, which gives giants like Royal Caribbean Cruises Ltd (NYSE:RCL) a space to raise prices. Royal Caribbean saw its net yield—revenue per passenger per cruise day—rise 13% in Q2 2024 year-over-year.
Royal Caribbean Cruises Ltd. (NYSE:RCL) raised its full-year EPS guidance to $11.25-$11.45 per share, reflecting 68% year-over-year growth, surpassing the consensus of $11.07 per share. Additionally, Royal Caribbean Cruises Ltd (NYSE:RCL) reinstated its quarterly dividend at $0.40 per share, the first since its suspension in 2020.
Ariel Fund stated the following regarding Royal Caribbean Cruises Ltd. (NYSE:RCL) in its Q2 2024 investor letter:
“Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL), advanced on another quarterly earnings beat and subsequent raise in full-year guidance. Stronger than anticipated consumer demand, healthy onboard spend, robust pricing and solid cost containment lifted recent results. Additionally, RCL is benefitting from several new megaships, more island destinations and re-entry into the China market. The resiliency of the core cruise consumer, in combination with management’s superior operational expertise and revised earnings outlook, lays the foundation for RCL to exceed its three-year strategic imperative, the Trifecta Program, a year earlier than expected.”
6. IBM Common Stock (NYSE:IBM)
Number of Hedge Fund Investors: 54
A caller recently asked Jim Cramer about IBM Common Stock (NYSE:IBM) in a recent program. Here was Cramer’s response:
“It yields about 3%. Say I wanted to buy 100 shares of IBM over the course of the next year. I would buy 25 and then let it come back down because it’s had pretty much of a parabolic move. But I would be a buyer of this move. I think Arvind Krishna’s (IBM CEO) doing a remarkable job.”
Can IBM Common Stock (NYSE:IBM) become a top AI stock and compete with peers like Oracle, Salesforce and Microsoft?
The company recently released its Telum II Processor and Spyre Accelerator at Hot Chips 2024, designed to boost the next-gen IBM Z mainframe system. Telum II offers 8 cores at 5.5GHz with 36MB L2 cache per core and a 40% increase in total on-chip cache. Spyre adds AI capabilities with 32 compute cores and 1TB memory. Both chips, built by Samsung on a 5nm process, will launch in 2025, supporting IBM’s AI initiatives. IBM Common Stock (NYSE:IBM) also acquired Accelalpha to strengthen its Oracle consulting expertise, further enhancing its cloud and AI capabilities for enterprise clients.
IBM Common Stock (NYSE:IBM)’s latest quarterly results were driven by software, consulting, and infrastructure, boosted by accelerated enterprise AI adoption. Revenue grew 4% year-over-year, and free cash flow rose 24%, reflecting the company’s strong financial health. IBM Common Stock (NYSE:IBM) is well-positioned to capitalize on AI trends with its watsonx AI platform and Granite models, offering secure and transparent solutions that address data privacy concerns, critical for enterprise AI implementation. Their unique blend of consulting, software, and AI solutions supports large-scale AI projects.
Diamond Hill Capital Long-Short Fund stated the following regarding International Business Machines Corporation (NYSE:IBM) in its first quarter 2024 investor letter:
“Among our bottom Q1 contributors short positions in Dick’s Sporting Goods, International Business Machines Corporation (NYSE:IBM) and Palomar Holdings. Though we believe the quality and durability of IBM’s free cash flow-generating capabilities remain questionable, investor sentiment has improved amid optimism for the company’s still-nascent AI product suite.”
5. Trane Technologies PLC (NYSE:TT)
Number of Hedge Fund Investors: 57
Jim Cramer was recently asked about Johnson Controls. He said he likes the stock but also named Trane Technologies PLC (NYSE:TT) among his favorite names.
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.
4. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Investors: 65
Talking about the best performers of the third quarter in a latest program on CNBC, Jim Cramer said:
“I just have such a soft spot for Arista Networks. Probably the most unsung of all these winners because it’s a dominant player when it comes to network infrastructure for the cloud, but no one ever sees it. It’s got a lot of business with the data center. I know this is tiresome, but it works. Arista hit an all-time high today. I think it’s got more room to run because this is the dominant player in all sorts of switches, adapters, and networking services that people don’t really care about but are making a lot of money.”
The Information recently reported that Meta Platforms is preparing a cluster of over 100,000 NVIDIA H-100 GPUs to train the latest version of its Llama language model. Evercore ISI believes Arista Networks Inc (NYSE:ANET) is likely to be the networking partner for Meta Platforms’ cluster. Ethernet will handle the networking for the project, as InfiniBand isn’t capable of supporting a cluster of this scale, leading Evercore to believe Arista Networks Inc (NYSE:ANET) will supply some of the infrastructure.
“Assuming GPU’s represent 80% of total spend on this AI cluster, this would imply total cost of around $2.5B, of which 10% is likely spent on infrastructure,” said Evercore analyst Amit Daryanani, in a note. “This could represent a $250M revenue opportunity for Arista, if they won the business.”
Arista Networks Inc (NYSE:ANET) has previously worked with Meta, providing switches for a cluster with 24,000 GPUs. Daryanani noted that their strong relationship makes it likely Arista will supply the switches for this new cluster. If successful, this could boost Arista’s $750 million AI revenue target for 2025. Evercore maintains an Outperform rating on Arista Networks Inc (NYSE:ANET) with a $400 price target.
What makes Arista Networks Inc (NYSE:ANET) a promising AI stock?
Arista Networks Inc (NYSE:ANET) is set to gain amid the AI-driven shift to high-speed networks due to its open Ethernet design and unified Arista EOS. The company’s partnership with Broadcom also created an opportunity for Arista Networks Inc (NYSE:ANET) to expand its integrated software and hardware solutions.
Arista Networks Inc (NYSE:ANET) claims its Ethernet architecture based on merchant silicon allows fast deployment for major hyperscalers and Tier-2 cloud providers.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“We trimmed our positions in Arista Networks, Inc. (NYSE:ANET) and Carlisle Companies. Both of these companies have witnessed strong multi-year growth in their stock prices, which have resulted in elevated valuations. While we remain confident in the long-term prospects of both of these businesses, we trimmed our holdings to more appropriate position sizes given the risk/reward offered.”
3. Palo Alto Networks (NASDAQ:PANW)
Number of Hedge Fund Investors: 66
When asked about Palo Alto Networks (NASDAQ:PANW) in a latest program, Cramer said the stock is “sensational.”
DA Davidson also started covering the stock with a Buy rating and added it to its ‘Best of Breed Bison’ category of stocks.
DA Davidson’s Rudy Kessinger thinks Palo Alto Networks Inc’s (NASDAQ:PANW) three platforms will result in vendor consolidation which would be better than other companies. They believe Palo Alto Networks Inc (NASDAQ:PANW) has so far captured only 7% of the market which could reach a whopping $200 billion.
Palo Alto Networks Inc’s (NASDAQ:PANW) biggest strength is its Prisma Secure Access Service Edge (SASE) product, which generated about 50% growth in the fiscal third quarter year over year. Another growth catalyst for Palo Alto Networks Inc (NASDAQ:PANW) is Thunderdome Defense Information System Agency’s zero-trust network architecture.
Parnassus Growth Equity Fund stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its Q2 2024 investor letter:
“Palo Alto Networks, Inc. (NASDAQ:PANW) has been a profitable position for the portfolio. Given its elevated valuation, we decided to sell it to fund the purchase of Workday, where we see greater opportunity and a clearer story of margin expansion potential.”
2. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Talking about an analyst downgrade on Apple Inc (NASDAQ:AAPL), Jim Cramer acknowledged that iPhone maker is facing some “near-term” headwinds but urged investors to buy the stock.
“When everyone knows there are real issues, though, you will have a limited window to buy the stock after the expected post-weakness.”
Almost every bullish case on Apple Inc (NASDAQ:AAPL) was built around this assumption: millions of people would rush to upgrade their iPhone because of AI features. But the latest numbers for iPhone 16 do not show much enthusiasm for the new device.
Apple Inc (NASDAQ:AAPL) has been seeing a long-term decline in mobile carrier upgrade rates, especially postpaid, for several years. This suggests that people are holding onto their devices longer, likely due to economic factors, satisfaction with current technology, or a lack of exciting new features in recent models. This trend isn’t great for Apple Inc (NASDAQ:AAPL). Can Apple Intelligence break this trend? We’ll find out soon.
However, the assumption that we will see a huge upgrade cycle of iPhone just because of AI is big and comes with a lot of risks. Apple Inc (NASDAQ:AAPL) trades at a forward PE multiple of around 35x, well above its 5-year average of nearly 27x. Its expected EPS forward long-term growth rate of 10.39% does not justify its valuation, especially with the iPhone upgrade cycle assumption. Adjusting for this growth results in a forward PEG ratio of 3.33, significantly higher than its 5-year average of 2.38.
Vltava Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“You probably have not missed the news that Warren Buffett has already sold half the stock from his largest public markets investment, Apple Inc. (NASDAQ:AAPL). It was a phenomenal investment for Berkshire. Over the course of seven years or so, it brought a profit of well over USD 100 billion. Apple comprised a very large position within Berkshire’s public portfolio, and this was the reason we avoided Apple stock outright during that time. We considered our exposure to Apple through our holdings of Berkshire stock to be sufficient, and we ended up making a lot of money on it. There has been a great deal of speculation in the market about what Buffett’s sale of Apple signals regarding his view of the stock market. I think the reason for the sale is much simpler. Buffett probably considers Apple stock so expensive that he prefers to cash in at 20% less (after all, Berkshire must pay tax on its profits). He started selling in the first quarter of the year. When I was in Omaha for the general meeting in May, Buffett said he was still selling, and I expect he continued to do so in the third quarter. I have to say that, as a Berkshire shareholder, I am happy about the Apple sale. I think Berkshire’s management will find a better use for this money, as they always have in the past. It is quite likely that they already have a very specific idea about this. If that takes two or three years, it does not matter at all. This is not a race and, in the meantime, the risk of holding Berkshire Hathaway stock itself has been greatly reduced.”
1. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
Talking about an analyst downgrade on Amazon.com Inc (NASDAQ:AMZN), Cramer questioned the logic of naysayers and said the company always makes a comeback.
“How many times has Amazon been up against headwinds? Do you know how many times they’ve made inexplicable moves? It is nothing new. They always came back; it is in their DNA. It always does. I remember a year and a half ago I was screaming because Amazon Web Services was underperforming, and it came right back.”
Cramer thinks it’s just a matter of time before the stock comes back.
“I think it is a matter of time before Amazon bounces back as usual. No hurry. The stock does seem to be headed lower; I have no doubt about that. I get it. But sell to buy it lower? Can you really get back in that? Too hard.”
AWS’s revenue growth accelerated from 17.2% in Q1 to 18.8% in Q2, driven by a shift from on-premises infrastructure to cloud solutions and increasing demand for AI capabilities. Amazon.com Inc (NASDAQ:AMZN) advertising segment added over $2 billion in revenue year-over-year, indicating significant potential in video advertising and opportunities within Prime Video offerings.
Like other tech companies, fears stemming from high CapEX are keeping investors on the sidelines. Amazon.com Inc (NASDAQ:AMZN) spending is expected to rise amid broadband project Project Kuiper and AI growth. Investors are still figuring out whether AI monetization and ROI will come anytime soon. Amazon.com Inc (NASDAQ:AMZN) is also facing a slowdown in consumer spending, especially for higher-ticket items like electronics and computers.
Based on Amazon.com Inc (NASDAQ:AMZN) Q3 guidance, its revenue growth would be 11%. The stock is trading 35x its fiscal 2025 earnings estimates set by Wall Street. This shows the stock is fairly priced and investors looking for strong growth could look elsewhere.
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Amazon.com, Inc.’s (NASDAQ:AMZN) continued growth is driven by its strong performance in AWS and advertising, which grew 19% and 20%, respectively. E-commerce growth moderated to 9.3%, likely due to softer consumer demand.
In previous letters, I mentioned how Amazon’s heavy investments in logistics and fulfillment suppressed margins for some time, but the company is now reaping the rewards of those earlier expenditures. European operations have been profitable for the second consecutive quarter, while North American operating margins have risen from pandemic lows to 5.3%. A key ongoing area of focus for Amazon has been reducing the “cost to serve”; this is beginning to show tangible benefits. In 2023, Amazon undertook a “regionalization” strategy, which divided the U.S. into eight distinct regions for fulfillment and transportation, with corresponding distribution centers in each. As I learned from an expert interview done by InPractise, “regionalization” has resulted in estimated shipping expenses dropping from $4.76 per unit to $4.50, and they are now approximately $4.26, with potential reductions of 2-3% annually. Interestingly, Amazon leaned on its third-party vendors (3P) to finance much of this strategy. It did so by requiring 3P vendors ship inventory to the multiple regional distribution centers, instead of to a single location as they used to do. Moreover, Amazon imposed penalties for failing to meet strict minimum and maximum quantities. In this way, Amazon used 3P inventory to expand its distribution capacity by around 24 million square feet, much of which it could use for its own 1P inventory. Clever strategy, but one wonders if this raises the risk of an eventual vendor backlash due to the added financial and logistical pressures on 3P sellers.
Like Alphabet, Amazon is investing heavily in its AWS infrastructure to support its growing AI business. In the first half of the year, the company spent $30.5 billion on capital expenditures, with plans to exceed that in the year’s second half. When questioned about this during the earnings call, CEO Andy Jassy emphasized that they are seeing significant demand for AI-related services, which he believes will become a “very large” business for Amazon.”
While we acknowledge the potential of Amazon.com Inc (NASDAQ:AMZN), our conviction lies in the belief that under the radar 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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