In this article, we will take a detailed look at Jim Cramer Latest Stock Portfolio: 10 Stocks to Watch in September.
Jim Cramer said during his latest program on CNBC that the Federal Reserve wanted to contain inflation and make sure it’s going in the “right direction” before initiating its first rate cut. With the first aggressive rate cut, Cramer believes “most businesses” can thrive.
Cramer, who is currently in Silicon Valley, said technology companies are, however, not “hostage” to the Fed and they are “automaters.” He said these companies are trying to raise margins by automating “what can be automated.”
Jim Cramer said currently cash is flowing towards companies that “would have been doomed” if the Fed didn’t start cutting rates. He said this was “day one” in many more rate cuts to come, which would create a “backdrop of positivity” for the broader market.
For this article, we chose 10 important stocks Jim Cramer talked about during his latest programs on CNBC. 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).
10. Goldman Sachs Group Inc (NYSE:GS)
Number of Hedge Fund Investors: 8
Jim Cramer in a latest program highlighted Goldman Sachs’ projection that its capital markets business would be down 10%.
Cramer was referring to Goldman CEO David M. Solomon’s comments at a conference in New York, where he said the challenging macro environment would cause the company’s trading revenue to slump 10% in the third quarter.
Ariel Appreciation Fund stated the following regarding The Goldman Sachs Group, Inc. (NYSE:GS) in its Q2 2024 investor letter:
“Shares of global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS), also rose in the period following solid earnings results, highlighted by strength in fixed income, currencies 1 Sindreu, Jon. “The Second Quarter Split the Market.” The Wall Street Journal, July 1, 2024, p. B9. and commodities (FICC) as well as equities trading and better-than-expected investment banking fees. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and working to improve profitability in Platform Solutions by 2025. With the possibility of increased capital requirements from its regulators, GS plans to reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
9. GameStop Corp (NYSE:GME)
Number of Hedge Fund Investors: 12
Cramer said in a latest program that we should “stop pretending that anything real is going on at GameStop.”
Cramer highlighted the core problem haunting GameStop Corp (NYSE:GME): everyone can now download and buy games online, they don’t need to go to brick-and-mortar stores for that.
Cramer said the company no longer holds conference calls, not even the “sham” calls it used to hold in 2022.
“As I see it GameStop’s core business doesn’t matter anymore, what matters is fundraising – it’s very good at selling stock if not video games,” Cramer added.
GameStop Corp (NYSE:GME) troubles are indeed deep and wide. The gaming industry is forecast to grow from $183.9 billion in 2023 to $187.7 billion in 2024, driven by stronger console and software sales. Despite this, GameStop’s revenue is plunging.
The only bright spot in the company’s latest quarterly results were its earnings as the company turned profitable and crushed estimates. How did that happen? GameStop Corp (NYSE:GME) net interest income rose from $11.6 million last year to $39.5 million this year. This was mostly due to the rising cash balance the business has and to higher interest rates. However, with interest rate cuts and almost all business segments seeing revenue declines, investors cannot count on this one-time earnings growth.
Revenue for the quarter came in at $798.3 million, a sharp 31.4% drop from the $1.16 billion posted the previous year, and fell short of analysts’ expectations by $105.7 million. The decline hit all segments of the business. Hardware and accessories revenue tumbled 24.4% to $451.2 million, down from $597 million. Software sales also took a significant hit, falling 47.7% to $207.7 million from $397 million the year prior. These sales cover new and pre-owned gaming software, digital content, and PC entertainment.
A few years ago, there had been optimism surrounding its collectibles business as a potential growth driver. However, even that segment is facing setbacks, with quarterly revenue from collectibles down 17.9% to $139.4 million, compared to $169.8 million a year earlier.
8. Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 32
Jim Cramer was asked about Energy Transfer LP Unit (NYSE:ET) during a latest program. Here is what he said:
“I am a buyer of Energy Transfer.”
Mizuho also added the stock to its top picks list and gave an Outperform rating. The firm set a $20 price target on the stock, saying Energy Transfer LP Unit (NYSE:ET) improved leverage outlook should allow more aggressive capital return beyond the current 3- 5% distribution growth rate.
Energy Transfer LP Unit (NYSE:ET) is being pitched as an AI stock in the energy industry as the rise of data centers will increase energy demand, helping ET. According to an estimate, gas demand for electricity to run data centers is expected to increase by a whopping 8 billion cubic feet a day by 2030.
Bank of America published a list of stocks poised to benefit from the electrification theme of future technology, driven by AI, data centers and push for electrification. BofA picked Energy Transfer LP Unit (NYSE:ET) for this theme under the oil and gas category.
Energy Transfer LP Unit (NYSE:ET) bulls also argue that just 10% of ET business is exposed to the volatile commodities sector.
7. Southern Co (NYSE:SO)
Number of Hedge Fund Investors: 32
When asked about Southern Co (NYSE:SO), Cramer said that the company’s dividend yield is “not that much.” However, he said the company’s big “nuke operation” is “fabulous.”
Cramer called Southern Co. a “baby growth story.”
Southern Co (NYSE:SO) is positioning itself as a key player in meeting rising power demand, with a strong focus on nuclear energy. Its Vogtle Unit 3 is one of only three nuclear power additions in the U.S. since the 1990s. Vogtle Unit 4, which began operations in April 2024, can supply carbon-free electricity to around 500,000 homes and businesses for up to 80 years.
As of the second quarter of 2024, the company’s energy mix is largely clean, with coal accounting for just 17%, while natural gas makes up 48%, and nuclear and renewables comprise the rest. Southern Co (NYSE:SO) added 14,000 new residential customers in its electric businesses and 6,000 in its natural gas division during the quarter.
With nearly 200 potential projects and over 30 gigawatts of load growth on the horizon, Southern Co (NYSE:SO) is well-positioned to capitalize on increased energy demand in the coming decade.
Southern Co (NYSE:SO) shares are up about 26% so far this year. The stock is a bit overvalued, trading at a P/E of 21, compared with the industry average of 18. Wall Street expects the company’s revenue to grow just over 3% next year. The stock’s dividend yield is also low when compared with peers.
6. Rivian Automotive Inc (NASDAQ:RIVN)
Number of Hedge Fund Investors: 37
When asked about Rivian Automotive Inc (NASDAQ:RIVN) in a latest program, Jim Cramer said Rivian has “got the money to be able to make it.”
“That does not mean the stock is a buy it does mean they are gonna make it.”
Cramer recommended the questioner to let the stock “percolate” and do not expect anything big anytime soon.
Morgan Stanley analyst Adam Jonas in July said Rivian Automotive Inc (NASDAQ:RIVN) AI potential could match that of Tesla’s. Morgan Stanley’s optimistic view on Rivian is that the electric vehicle maker is uniquely positioned, apart from Tesla (TSLA), to scale a fully integrated software stack critical to harnessing the broad AI opportunity. This AI potential could attract investors at a market value 1/60th that of Tesla. The AI factor significantly contributes to Morgan Stanley’s bullish price target of $33 for Rivian Automotive Inc (NASDAQ:RIVN).
Rivian Automotive Inc (NASDAQ:RIVN) has suddenly become interesting after the company signed a deal with Volkswagen according to which the German company will invest a whopping $5 billion in it for a joint venture to develop next-generation software-defined vehicle platforms.
During the second quarter, Rivian Automotive Inc (NASDAQ:RIVN) delivered 13,790 vehicles, slightly up from 13,588 in the previous quarter and much higher than 12,640 in the prior-year quarter. Production took a hit as the company’s Illinois plant was closed for about 25 days as it was upgrading it to streamline production processes. Rivian is going through a cost-cutting and efficiency-boosting phase.
Amazon also has a significant stake in the company and Rivian plans to provide the e-commerce giant with 100,000 electric delivery vans (EDVs).
While Rivian Automotive Inc (NASDAQ:RIVN) is still a loss-making company, it expects to swing to a “modest” profit by the end of this year.
Meridian Hedged Equity Fund stated the following regarding Rivian Automotive, Inc. (NASDAQ:RIVN) in its first quarter 2024 investor letter:
“Rivian Automotive, Inc. (NASDAQ:RIVN) is a US-based manufacturer of electric vehicles, namely the R1T pickup truck and R1S SUV. They also have exposure to the commercial vehicle market with their electric delivery vans (EDVs) that are sold to companies like Amazon. The company has faced challenges amid the broader slowdown in electric vehicle demand and rising interest rates. This has contributed to Rivian underperforming expectations over the past few quarters. Rivian has also incurred losses as it continues to invest in the development of its products and manufacturing capabilities. We own Rivian in a hedged structure, which provides a significant margin of safety. Despite the near[1]term challenges, several factors provide optimism that Rivian can emerge as a long-term winner in the EV market. Rivian’s balance sheet is strong, with a substantial cash position that enables the company to continue investing in its growth and navigate through the current economic headwinds. Rivian is also unveiling the R2, which is a smaller and more affordable EV platform that will open the company’s products to a wider customer base. Lastly, Rivian’s investment in the enhancement of its production capabilities should improve the company’s manufacturing efficiency and drive a path to profitability. We continue to hold the company in a hedged structure.”
5. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
When asked about Palantir Technologies Inc (NYSE:PLTR), Cramer said:
“Palantir is a cold stock I don’t have anything to say about it.”
Cramer has time and again said that he is struggling to know what Palantir Technologies Inc (NYSE:PLTR) actually does and complained the company doesn’t tell much about its business.
During the June quarter, Palantir’s overall revenue rose 27% year over year while US commercial revenue grew by a whopping 55%.
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
However, Palantir Technologies Inc (NYSE:PLTR) stock’s valuation has been a concern for many.
The stock is trading at about 21.2 times next 12 months (NTM) revenue. For fiscal year 2024, Palantir expects revenue growth of 24% year-over-year (YoY) to $2.746 billion, with an adjusted operating income of $970 million, representing a 35.3% margin. However, revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price of $36.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
4. Kroger Co (NYSE:KR)
Number of Hedge Fund Investors: 46
Jim Cramer in a recent program praised Kroger Co (NYSE:KR) latest results, saying many thought the company would be “distracted” because of its efforts to buy Albertsons and won’t be able to focus on its core business. However, the company proved the opposite is true. Cramer said CEO Rodney McMullen’s “magic” kept food costs down while tackling the tough labor force and commodity environment.
“Kroger Co (NYSE:KR) confounded the critics by developing a superior loyalty program, regionalizing their storage and creating the best store brand private label products out there.”
Cramer also highlighted a comment from the CEO made during the latest earnings call:
“Budget-conscious customers are buying more at the beginning of the month to stock up on essential items and groceries.
And then as the month progresses, they are more cautious with their spending. In response, we are supporting our customers by keeping prices low through promotions, including loyalty discounts, personalized offers and fuel rewards. We are also expanding our multi-tiered portfolio of Our Brands products, which provides customers exceptional alternatives to national brands competing on quality, while at a noticeable lower price point. Our long term model demonstrates that by consistently keeping prices low, we increase customer loyalty and grow share of wallet. While the food-at-home industry remains competitive, our model drives efficiencies that allow us to sustainably invest in value and maintain competitive price spreads with key competitors.
Read the full earnings call transcript here.
3. CVS Health Corp (NYSE:CVS)
Number of Hedge Fund Investors: 60
A caller asked Jim Cramer about CVS Health Corp (NYSE:CVS). Cramer said he’s “concerned” about the company
“I do not like stocks that sell 7 times earnings and have a 4.7% yield. You are too bullish if you endorse it. Let’s just keep it on the ice for the moment,” Cramer said.
What ails CVS Health Corp (NYSE:CVS) is the rising competition. CVS has expanded beyond retail, particularly after acquiring Aetna in 2018, but retail and pharmacy sales still account for around 50% of its total revenue. The pharmacy services segment is facing growing competition from non-traditional retailers like Kroger, Walmart, and Costco, as well as from new disruptors like Mark Cuban’s Cost Plus Drugs and Amazon, which has expanded into healthcare and pharmaceutical sales.
Retail margins are also under pressure, with competitors offering cheaper prescriptions and household goods. CVS Health Corp (NYSE:CVS) market share in pharmacy services has only grown modestly, from 23.8% in 2017 to 25.7% in 2023, despite significant acquisitions. CVS Health Corp (NYSE:CVS) has spent $96.6 billion on deals like Aetna, Signify Health, and Oak Street Health. Meanwhile, CVS’s long-term debt has risen sharply, from $25.1 billion in 2017 to $65 billion, and shares outstanding have grown at an annual rate of 3.5%.
Ariel Global Fund stated the following regarding CVS Health Corporation (NYSE:CVS) in its Q2 2024 investor letter:
“American healthcare company, CVS Health Corporation (NYSE:CVS), also declined following disappointing earnings results and a subsequent reduction in full year guidance. The miss was primarily due to increased utilization of Medicare Advantage plans and weakness in the health services segment driven by the loss of a large client and continued pharmacy client price improvements. In response, management reiterated its focus on improving margins and enhancing its positioning in Medicare Advantage. CVS believes the program can remain an attractive business for Aetna and CVS Health over time and will construct its bid for 2025 as a multi-year repricing opportunity across plan level benefits. Meanwhile, CVS continues to return capital to shareholders through dividends and a recent accelerated share repurchase transaction.”
2. Home Depot Inc (NYSE:HD)
Number of Hedge Fund Investors: 86
When asked about Home Depot Inc (NYSE:HD), Jim Cramer revealed he bought some more shares of the company on the latest dip.
“Home Depot is good.”
The fundamental story behind Home Depot Inc (NYSE:HD) is strong. According to data from Argus Research, about 75% of U.S. homeowners with mortgages are locked in below 4.5%. With rising inflation and high interest rates, people are keeping their homes and avoiding new purchases. That means their homes need repairs and fixes. That’s what boost Home Depot Inc (NYSE:HD) business.
Data also shows that about 70% of US homes are over 25 years old and need repairs and renovation. All of this fits well into Home Depot’s growth story.
Analysts believe Home Depot Inc (NYSE:HD) acquisition of specialty trade distribution company SRS Distribution was a master stroke from the company since it gave Home Depot a 17% market share in an industry with a total addressable market of $1 trillion. SRS is a residential specialty trade distribution company across several verticals serving professional roofers, landscapers and pool contractors. Home Depot Inc (NYSE:HD) is also investing in technology to improve business. Its pro intelligence tool and CRM platform that use data science for better insights and cross-selling opportunities are expected to boost sales and client relationships.
Polen Focus Growth Strategy stated the following regarding The Home Depot, Inc. (NYSE:HD) in its Q2 2024 investor letter:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: The Home Depot, Inc. (NYSE:HD), Meta Platforms, and AbbVie. With Home Depot, much of the quarter’s weakness came in April, as a higher-than-expected inflation reading caused investors to question the likelihood of imminent rate cuts in 2024. Given Home Depot’s sensitivity to interest rates, as it relates to home improvement projects, the stock sold off in the period.”
1. PayPal Holdings Inc (NASDAQ:PYPL)
Number of Hedge Fund Investors: 87
When asked about PayPal Holdings Inc (NASDAQ:PYPL), Cramer said he does not have much to say about the company except for “this guy” Alex Chriss (PayPal CEO), who Cramer believes is a “miracle worker.”
“I am a buyer of PayPal.”
PayPal’s CEO Alex Chriss, is opening new growth horizons for PayPal Holdings Inc (NASDAQ:PYPL) beyond just a way to send or receive money. Thanks to his vast experience with small businesses at Intuit, he is integrating valuable features for customers and merchants to boost small business activity on the platform.
What are these features?
PayPal’s Fastlane offers a seamless checkout experience for customers by storing their data after the first purchase, making future transactions faster. Merchants benefit from higher conversion rates, with tests showing guest conversion jumping from 40-50% to around 80%. Fastlane also speeds up the checkout process by 32%, boosting customer satisfaction. PayPal Holdings Inc (NASDAQ:PYPL) charges merchants a fee for this service, which merchants find worthwhile given the increased conversions.
PayPal Holdings Inc (NASDAQ:PYPL) is also benefiting from its partnerships with companies like Meta, Salesforce, and Adobe. Its PayPal Complete Payments Platform (PPCP) has seen a 40% rise in SMB volume this year, thanks to new merchant integrations.
The company is also launching PayPal Holdings Inc (NASDAQ:PYPL) Ads, a high-margin opportunity that leverages its ecosystem of over 429 million active users. The platform allows merchants to target ads more effectively, increasing their return on investment.
Many don’t know but PayPal has also dabbled into cards, with its debit card offering 5% cashback and integration with Apple Wallet. Recent European regulations also allow PayPal Holdings Inc (NASDAQ:PYPL) to use Apple’s NFC technology for contactless payments, enhancing its reach in international markets, especially in Europe where such payments are popular.
PayPal Holdings Inc (NASDAQ:PYPL) bulls believe the stock’s valuation has become attractive. It forward P/E ratio of 14 is now 55% lower than its five-year average. Wall Street analysts expect PayPal Holdings Inc (NASDAQ:PYPL) earnings to grow 9.5% next year. If we incorporate PayPal new product growth strategy and catalysts, the stock looks undervalued. PayPal Holdings Inc’s (NASDAQ:PYPL) cash sits at about $14 billion, and long-term debt stands at only $9 billion.
Artisan Value Fund stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2024 investor letter:
“We made one new purchase in Q2, adding PayPal Holdings, Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal has world-class assets. It operates the largest two-sided payment network (ex-China); owns Venmo, the largest peer-to-peer payment network (ex-China); and owns Braintree, the third-largest modern payment service provider (PSP), which is growing at a similar pace to peers, such as Stripe and Adyen. Each of the PSPs are taking share from legacy competitors such as Worldpay, with significant runway left on remaining share gains. As the original e-commerce payment processor with years of history in the marketplace, PayPal has access to a large trove of customer data, a first-class risk engine and embedded consumer and merchant trust. This is difficult for newer peers to replicate without time and investment. Post-COVID, PayPal’s shares have been pressured by intensifying competition, the threat of which has seemingly been exacerbated by prior management missteps. Shares trade for under 14X next year’s expected earnings, which have been reset materially lower over the past year due to depressed expectations. This is an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics and a strong balance sheet. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets. While we wait for tangible results, we should have plenty of free cash flow pointed back at us in the form of share repurchases.”
While we acknowledge the potential of PayPal Holdings, Inc. (NASDAQ:PYPL), 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 PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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