In this article, we will take a detailed look at Jim Cramer Latest Portfolio Update: Top 10 Stocks.
Jim Cramer during his October 14 program on CNBC looked excited as he celebrated the rebound of major tech stocks, saying these companies are showing their “staying power” despite the odds.
“We’re back. That’s right. Whatever you want to call them, these big tech plays are demonstrating their staying power no matter what happens.”
Cramer said that the latest earnings season would be critical for the overall market and investor portfolios. He also pointed out the broadening of the rally, saying other groups besides the tech industry are also rebounding.
“This rally is not a zero-sum equation where the rest of the market does nothing. Other groups can work, too, in this market. There’s a lot of money going around, and we know there’s a lot of money coming into the market. The Fed is cutting rates, and friendly cash won’t be worth as much as it was. But the staying power of the Magnificent 7 is truly unbelievable.”
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 important stocks he’s talking about. 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. GE HealthCare Technologies Inc (NASDAQ:GEHC)
Number of Hedge Fund Investors: 20
Jim Cramer in a recent program said GE HealthCare Technologies Inc (NASDAQ:GEHC) has been a laggard but will bounce back.
“GE HealthCare Technologies Inc (NASDAQ:GEHC), which we own for the Charitable Trust, is a laggard that makes MRI machines and other big-ticket medical devices. It is just starting to get its sea legs after COVID knocked it back. Chinese orders slowed, and high financing costs are dragging it down. You need to borrow money since it’s so expensive. But all those negatives are dissipating, so the stock can work its way higher.”
Cooper Investors Global Equities Fund stated the following regarding GE HealthCare Technologies Inc. (NASDAQ:GEHC) in its Q2 2024 investor letter:
“However, we are keen to highlight other Stalwarts and Growth businesses we own that should benefit in a more profound way than hardware makers currently enjoying an initial build-out phase. To paraphrase Salesforce CEO Mark Benioff, if hardware is the picks and shovels of GenAI then data is the real gold.
Another example is GE HealthCare Technologies Inc. (NASDAQ:GEHC), a global leader in diagnostic imaging equipment across multiple modalities. AI algorithms are making image quality better, assisting image analysis via computer vision, and enabling devices to be more accessible for new users. The next stage will be data-driven; via its many points of penetration into the patient journey, GEHC is accumulating large amounts of data across pathology, genomics, and imaging. Harnessing AI tools across that data to drive better patient outcomes should enable improved sales, margins and returns from a more competitive product offering.”
9. Fair Isaac Corp (NYSE:FICO)
Number of Hedge Fund Investors: 43
Talking about Fair Isaac Corp (NYSE:FICO) in a recent program on CNBC, Jim Cramer said:
“The FICO score is universally used, and no competitor comes close to its predictive power. I believe Fair Isaac could be purchased even tomorrow morning, despite the stock being up 390% in the past year.”
Cramer also said he gives “full endorsement” to the company.
Fair Isaac Corp (NYSE:FICO) is the data analytics company behind the famous FICO score used by lenders to assess an individual’s creditworthiness.
The company has margins of about 85% to 90% in its core credit-scoring business. However, its performance was closely tied to the credit markets. If the credit markets slowed down, FICO’s quarterly results would reflect that decline, making the company vulnerable to market fluctuations. About five years ago, Fair Isaac Corp (NYSE:FICO) expanded its offerings by adding a software segment. This strategic move allowed the company to generate organic growth while maintaining the stability provided by its high-margin scores business. The combination of these two segments creates a robust dynamic for FICO, enabling high-quality and profitable growth.
Still, FICO’s unique position in the market is attributed to its mathematical scoring model, which, when combined with credit bureau data, produces the final Fair Isaac Corp (NYSE:FICO) score. This business-to-business (B2B) aspect accounts for a significant portion of FICO’s revenue. B2B clients, who purchase the FICO score, typically pass any price increases along to the consumers through credit bureaus. Since the cost of a FICO score is often less than $1, it is considered negligible compared to the overall costs associated with loans, such as mortgages. This pricing structure means that even if Fair Isaac Corp (NYSE:FICO) were to double or triple its charges overnight, it would likely go unnoticed by consumers.
Headwaters Capital Management stated the following regarding Fair Isaac Corporation (NYSE:FICO) in its Q3 2024 investor letter:
“Top Contributors: Fair Isaac Corporation (NYSE:FICO) +31%: FICO was the largest contributor to performance during Q3 given the size of the position in the portfolio. FICO’s stock performed well during the quarter as declining mortgage rates stimulated both refinance and purchase mortgage volumes.”
8. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Jim Cramer in a latest program on CNBC called Palantir Technologies Inc. (NYSE:PLTR) one of the “craziest” stocks and reiterated his view that it is a “cold” stock. Cramer said Palantir is expensive and will stay expensive.
“The stock’s real expensive, but it’s going to stay expensive because Palantir Technologies Inc (NYSE:PLTR) software is apparently beloved by the Pentagon as well as its rabid fans. Would I buy it up 439% in the last two years? No. But I definitely wouldn’t short it.”
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 the 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 $42.
Overall, Palantir Technologies Inc (NYSE:PLTR) ranks 5th on Insider Monkey’s list titled Jim Cramer October Calls: Top 10 Stocks. While we acknowledge the potential of Palantir Technologies Inc (NYSE:PLTR), 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 PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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.”
7. Super Micro Computer Inc (NASDAQ:SMCI)
Number of Hedge Fund Investors: 47
Talking about Super Micro Computer Inc (NASDAQ:SMCI) Computer, Cramer said he’d prefer Nvidia over this stock.
“This is a company that makes something that goes hand in hand with NVIDIA. Lately, it stalled and had a weak second quarter. I’ve always thought when you have a primary idea like NVIDIA and a secondary idea like Super Micro, you don’t need the latter.”
Carillon Scout Mid Cap Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its Q2 2024 investor letter:
“Super Micro Computer, Inc. (NASDAQ:SMCI) was the top detractor to returns in the second quarter. Super Micro designs and manufacturers server solutions based on modular and open-standard architecture. This modular approach combined with a strong engineering culture helps the company to supply the market with advanced servers and rack-scale compute solutions quickly. After an impressive return in the first quarter, the company offered disappointing near-term earnings guidance, though we do not believe its long-term opportunity has diminished. We expect continued strong growth for several years, although the range of outcomes is quite wide; it is difficult to forecast AI server market growth with precision.”
6. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 85
Jim Cramer in a latest program said Tesla Inc (NASDAQ:TSLA) shares fell because the much-awaited robotaxi event did not come up to expectations. Cramer said this event was the “whole reason” to own the stock.
“It all pivoted on this event. That is the whole reason to own the stock, something Elon Musk admitted on his first call. That turned it around for a while. People liked it. It nearly doubled in three months, but when Tesla Inc (NASDAQ:TSLA) reported another weak quarter in July and announced that it was delayed until October, the stock went into another tailspin.”
Cramer also mentioned Tesla Inc (NASDAQ:TSLA) bull Adam Jonas (of Morgan Stanley) comments who called out Tesla for a “disappointing” lack of details.
Cramer said Elon Musk’s response to the question about the timing of robotaxis was “underwhelming.”
“Wall Street clearly does not have much confidence that the cybercab will be viable anytime soon.”
Cramer said for now it’d be better to stay on the “sidelines” of the stock and avoid buying it.
The Tesla event was indeed short on details. Notably absent was the discussion of a “more affordable” model that Musk had previously mentioned to boost confidence in Tesla’s vehicle sales growth outlook.
What about the $30,000 price tag claim?
Musk has indicated that the Cybercab will have a production cost of approximately $30,000. Operating within the robotaxi fleet is projected to cost around $0.20 per mile. With a production cost of $30,000, the retail price of the Cybercab is likely to exceed this figure. For instance, if the Cybercab is priced at $30,000 per unit, that translates to $15,000 per seat. In contrast, the average price per passenger seat in Tesla’s most affordable long-range RWD Model 3—factoring in full self-driving (FSD) licensing—is under $10,000 ($29,990 post-incentive vehicle price plus $8,000 for the FSD license, divided by four passenger seats). Regarding operational costs, while the Cybercab is expected to cost $0.20 per mile, charging the Model 3 is estimated at under $0.10 per mile, leaving a significant margin to cover maintenance and downtime.
There is a lot of hype around Tesla robo taxis but many believe they will not be enough to fix the company’s long-term challenges.
What are these challenges?
Tesla Inc (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. Even Rivian’s CEO suggested Tesla could be nearing market saturation for these models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
For Q2 2024, Tesla Inc (NASDAQ:TSLA) saw a 20% year-over-year decline in revenue from China, while BYD reported over 20% growth in the same period. This trend may continue as Chinese automakers release new models, and Tesla could be forced to cut prices to maintain delivery volumes—further pressuring its operating margins in the coming quarters.
Tesla Inc (NASDAQ:TSLA) is overvalued. The company’s consensus earnings-per-share (EPS) estimate for fiscal year ending December 2026 is $4.27, putting its forward price-to-earnings (PE) ratio at 60.2. With Tesla offering price cuts, future EPS growth may fall short of expectations. Investors might consider selling now and waiting for a better re-entry point, or exploring other electric vehicle (EV) options.
ClearBridge Small Cap Value Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“The strength in the stock market adds significantly to that enormous transfer of wealth, which one could argue is good for shareholders. But is it causal? That is, did the stock market do well because CEOs got large stock grants? Are the CEOs just the lucky recipients of a windfall when the market goes up and their employees perform well? Or do they require huge grants to do their jobs that no one else could possibly do as effectively?
Tesla, Inc. (NASDAQ:TSLA), and most of its shareholders, certainly think the latter is true. In 2018, Tesla’s board of directors crafted a pay package for CEO Elon Musk that would award him 12 tranches of 10-year, fixed-price options on 1% of company stock for every $50 billion in market cap the stock added. In total, the options would be for 304 million shares of the company at $23.34 a share. He would receive no other compensation, until or unless the board decided otherwise. Shareholders approved that pay package, and the stock added all that market cap and more, giving Musk the right to buy 10% of the company for $50 billion less than it was worth, adding to his existing 13% stake. Minority shareholders sued, and a court sided with them and expunged the package in January 2024. “The process leading to the approval of Musk’s compensation plan was deeply flawed,” ruled Judge Kathaleen McCormik of the Delaware Court of Chancery as part of a 200-page decision. It seemed like a long-awaited check on excessive compensation to one individual for the achievements of an entire company….” (Click here to read the full article)
5. Vistra Corp (NYSE:VST)
Number of Hedge Fund Investors: 92
Talking about Vistra Corp (NYSE:VST) and its data center-related growth potential, Cramer said he’s still bullish on the stock but highlighted that it has run too much.
“I think it’s a little overdone, but the next time it has one of its pullbacks, which do occur, I would do some buying.”
Vistra Corp (NYSE:VST) is a power generation company that is also involved in electricity generation and wholesale energy purchases and sales. Vistra Corp (NYSE:VST) has about 5 million customers and operates a 41,000-megawatt portfolio of natural gas, coal, nuclear, and solar assets, as well as battery storage facilities.
Citi earlier this year published a list of utility stocks that it’s bullish on amid the importance of power grids, growth in renewable energy and AI-powered demand. Vistra Corp (NYSE:VST) is one of the stocks Citi likes.
Guggenheim analyst Shahriar Pourreza who holds a Buy recommendation and a Street-high price target of $133 on Vistra Corp (NYSE:VST) thinks VST is a “unicorn” for its portfolio of both gas and nuclear power plants. Pourreza further said in his note to clients that data centers are exploring 24-hour power sources that are clean and “nuclear plants are a very strong avenue for that”, further adding to his thesis for the stock.
Fidelity Growth Strategies Fund stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“An overweight stake in utility company Vistra Corp. (NYSE:VST) (+24%) was the top individual relative contributor. In Q1, the Texas-based independent power producer completed its acquisition of Ohio-based nuclear fleet operator Energy Harbor. The new Vistra, with its expanded geographic footprint, is in strong position to gain from the buildout of AI-capable data centers, which require enormous amounts of power to run. It is expected that local grids in the U.S. will need to invest heavily over the coming years to improve their power infrastructure and meet growing demand. In the nearer term, firms may choose to contract with independent power producers, like Vistra, rather than rely on the local provider.”