In this article, we will take a detailed look at Jim Cramer October Calls: Top 10 Stocks.
Jim Cramer in a latest program on CNBC talked about the ills of “complacency” in investing and how sticking to a specific narrative costs investors money. He was criticizing negative analyst reports that keep downgrading stocks.
“We always hear how the bulls are being complacent and ignore downside risk. We almost never hear that the bears are being complacent and missing out on terrific opportunities, which I find to be absurd. Nobody does complacency like the bears. Remember, last night I spent a lot of time talking about how we had a slew of downgrades yesterday that I did not like, and stocks reacting to negative news already. Today, they seem like fortuitous notes that would end up costing you money if you listen to them.”
Cramer said that some analysts like to “take aim” at long-term winners and scare people out of some “amazing gains.” This, Cramer believes, is “downright wrong.” He said that even if investors want to sell a stock based on a downgrade, they should wait for it to “bounce” before pulling the trigger.
For this article we talked about 10 stocks Jim Cramer is talking about during his 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. Banco Santander SA (NYSE:SAN)
Number of Hedge Fund Investors: 9
When asked about HSBC, Cramer said in a latest program that this stock is just “OK.”
“If you want to own a foreign bank please own Banco Santander SA (BME:SAN), that’s a real good one.”
Banco Santander is a Spanish banking stock with a PE ratio of just under 6. The stock is up about 18% so far this year.
Santander continues to progress towards its medium-term goal of achieving a return on tangible equity (ROTE) between 15% and 17%.
In the first half of the year, the bank’s net interest income (€23.5 billion), fee income (€6.5 billion), and parent company profit (~€6.1 billion) all hit all-time highs, with a cost-to-income ratio of 41.6%, the best in 15 years.
Banco Santander SA (BME:SAN)’s geographic operations often move in different directions. Spain, which accounted for about 25% of first-half earnings, continues to perform well, with net interest income up more than 15% year-over-year to €3.65 billion. Spain’s ROTE exceeded 20%, a roughly seven-point improvement from a year ago. In Brazil, lower interest rates drove a nearly 40% increase in net income to €1.1 billion, with ROTE rising to 15.8%. This offset weaker performance in other areas, such as the U.K., where higher funding costs and mortgage pressures led to a 23% drop in first-half net profit and a ~300 basis point fall in ROTE to around 10.8%.
9. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)
Number of Hedge Fund Investors: 17
A caller recently told Jim Cramer he was getting ‘tired’ of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). Here was Cramer’s response.
“I’d rather double down on Cracker Barrel. I’ve got to tell you, I think Julie Masino (company CEO) is doing a good job.”
Cramer said the stock started to “lift” recently and urged the caller to “please” not sell the stock.
Cracker Barrel’s CEO is working on a ‘five-pillar” program to turn around the company. What are these pillars? The executive explained in detail these pillars in the latest earnings call:
“ Refining the brand, enhancing the menu, evolving the store and guest experience, winning in digital and off-premise and elevating the employee experience.”
Read the entire earnings call transcript to see the performance on these targets.
The latest quarterly results missed estimates on both EPS and revenue. However, there was an increase in revenue. The fiscal year’s outlook remains within analysts’ expectations. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) long-term debt stands at around $476 million, representing a debt-to-EBITDA ratio of 2.7 for the fiscal year.
Restaurant sales were slightly up, with total revenue for the quarter reaching $895 million, a 6.9% increase compared to the prior year. However, this figure was inflated by an extra week in the reporting period, without which sales would have been relatively flat. Restaurant comparable sales edged up 0.4%, but retail sales at its stores dropped 4.2%, reflecting ongoing pressure.
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) guidance for fiscal 2025 aligns with Wall Street’s expectations. The company anticipates revenue between $3.4 billion and $3.5 billion, similar to fiscal 2024, and projects slight sales growth. Analysts believe with rate cuts now started and the turnaround plan gaining steam, the stock could be fruitful for long-term holders.
8. CAVA Group Inc (NYSE:CAVA)
Number of Hedge Fund Investors: 33
Answering a question about restaurant company CAVA Group Inc (NYSE:CAVA) in a latest program, Jim Cramer said:
“You’ve got to hold Cava. And if it comes down, I want you to be able to buy more. It’s one of the great new concepts that we’ve seen in this market.”
Over the past year CAVA Group Inc (NYSE:CAVA) is up about 300% and the stock is trading at a forward P/E of over 200. What makes this restaurant stock so special?
It’s a fast-casual chain offering Mediterranean-inspired meals and has built its reputation on fresh, healthy ingredients and a mix of dine-in and takeaway options. In the second quarter, the chain reported a 35% rise in revenue year over year, with same-store sales up 14.4%, helped by a 9.5% increase in guest traffic. Its growth is bolstered by moves into new areas, including Chicago.
For 2024, some analysts project the company revenue growth in the mid-twenties percentage range. Management has indicated the possibility of stronger results in the latter half of 2024, which factors into the company’s valuation discussion.
Following strong second-quarter results, CAVA Group Inc (NYSE:CAVA) increased its EBITDA guidance by nearly 10% at the top end, expecting around $115 million. This values the stock at 104 times forward EBITDA. With an expected same-store sales growth range of 8.5% to 9.5% projected by the company, the valuation comes into question. Even McDonald’s hasn’t traded above 60 times free cash flow over the past decade.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
7. J M Smucker Co (NYSE:SJM)
Number of Hedge Fund Investors: 34
Talking about J M Smucker Co (NYSE:SJM) results in August, Jim Cramer said that the $5.6 billion acquisition of Hostess Brands last year might not be “panning out” as the company said its sweet-baked snacks segment sales were below expectations.
Cramer then alluded to the possible impact of GLP-1 weight loss drugs on J M Smucker Co (NYSE:SJM) sweet snacks business:
“Is it really macro? Is it really declining convenience center, like Celsius would say that?
Or, David, is it the endless pin—the tail on the GLP-1 that no one’s willing to admit?”
Jim Cramer said the company’s results were “not good” and maybe twinkies (JM Smucker’s snack cake) are losing their “allure.”
What were the highlights of these quarterly results? J M Smucker Co (NYSE:SJM) saw an 18% increase in sales year-over-year, but excluding the impact of the Hostess Brands acquisition, divestitures, and foreign exchange fluctuations, sales rose by 1% for the quarter ending July 31.
Sales in the U.S. Retail Coffee segment remained flat compared to the previous year, with segment profit increasing by 1%. Free cash flow was reported at $49.2 million, compared to $67.6 million in the previous year, driven by the decrease in operating cash flow and a reduction in capital expenditures.
Looking forward, J M Smucker Co (NYSE:SJM) expects comparable sales growth of approximately 0.5% to 1.5% for the full year, down from prior guidance of 9.5% to 10.5%. The company anticipates net sales will increase by about 8.5% to 9.5% compared to the previous year. Full-year adjusted earnings per share are projected to range from $9.60 to $10.00, with a midpoint of $9.80, below the consensus estimate of $10.03. Free cash flow for the year is expected to reach $875 million.
Middle Coast Investing stated the following regarding The J. M. Smucker Company (NYSE:SJM) in its Q2 2024 investor letter:
“The J. M. Smucker Company (NYSE:SJM), like Lululemon, is an S&P 500 component and one of the worst 70 or so stocks in the S&P 500 this year. The maker of Jif, Smuckers jams, Uncrustables, Folgers Coffee, and Dunkin Coffee pods has had a bad 10 months since announcing its purchase of Hostess Brands (Twinkies, Hostess Cupcakes, etc.). Hostess was expensive and exposes J.M. Smucker to the risk that the new weight-loss drugs suppress diehard consumers’ appetite for sweets.
I think J.M. Smucker shares have suffered enough, and are at a point where a buy should work. The company is producing ample free cash flow to cover its likely to grow ~4% dividend while also paying down debt, which will improve both its profitability and its stock value. J.M. Smucker’s products and brands are leaders, including Hostess. I don’t think this will be a huge winner, but I do think there’s relatively safe upside here. I should note that another of my idea sources, Thomas Lott, mentioned SJM on Cash Flow Compounders; I had already been looking at the company for a while, but it’s always good to see a smart investor following it.”
6. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Fund Investors: 39
Jim Cramer was recently asked about Nextracker Inc. (NASDAQ:NXT). Here was his response:
“This acts poorly. It is a club stock, and we had Dan Shugar (company CEO) on, and the stock acts as if it’s going to have a shortfall. Until we see the next quarter, I don’t want to trust it because it’s one of the poorly acting stocks, and I find it incredibly disturbing, incredibly disturbing.”
Jim Cramer has changed his stance on NXT several times.
A few weeks back, Jim Cramer was asked about First Solar. He instead pitched Nextracker Inc. (NXT).
“I know it’s been a big disappointment for Club members but you got to stick with Shugar (company CEO),” he said at that time.
Earlier this year, Jim Cramer had said the following about Nextracker Inc. (NASDAQ:NXT):
“Their technology lets you increase your yield from solar panels. The stock is down. It’s a great opportunity.”
Wall Street is also growing bullish on Nextracker Inc. (NASDAQ:NXT). Earlier this year, Mizuho gave a $59 price target on the stock, saying Nextracker Inc. (NASDAQ:NXT) is positioned to benefit from the demand growth of solar power driven by data centers and AI.
Nextracker Inc. (NASDAQ:NXT) stands to benefit from the secular tailwinds in the industry. According to data from the U.S. Energy Information Administration, solar is expected to grow at a CAGR of 26% over the next five years.
5. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Jim Cramer was asked about Palantir Technologies Inc (NYSE:PLTR) in a program on CNBC. Here was his response:
“Palantir Technologies Inc (NYSE:PLTR) is a cold stock. It is a meme stock. It is a stock that has momentum because individual investors keep piling into it. It is not really even a stock; it is just a barometer of enthusiasm for some business that may or may not be doing well. I wish there were more to 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 $36.
