In this article, we will take a detailed look at Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell.
Jim Cramer in a latest program commented on the latest stronger-than-expected jobs report, calling it “good news” and expressed surprise at how the stocks “roared” on the report.
“For years, we have been taught that when buying yields go up, stocks go down. Ever since the Fed gave us that double rate cut last month, we have been afraid that they have been acting so decisively. Something might be wrong with the economy—something they knew about, but we didn’t.”
Jim Cramer was also surprised by bank stock gains. He said that these stocks probably rose because a strong employment situation means fewer bad loans. Cramer also said we might be heading to “no landing at all.”
“People have a collective sigh of relief that we weren’t headed for a crash landing. They held onto their stocks with both hands.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its 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. First Watch Restaurant Group Inc (NASDAQ:FWRG)
Number of Hedge Fund Investors: 8
When asked about First Watch Restaurant Group, Jim Cramer said:
“Right now this restaurant group is very weird…. I’m worried about First Watch Restaurant Group Inc (NASDAQ:FWRG) being a competitive outfit. The multiple is way too high. I’m going to say no to that one.”
When First Watch reported weak Q1 results back in May, the bulls said the company would rebound as traffic declines were temporary. In that quarter the company saw a 4.5% year-over-year decline in same-restaurant traffic. The company noted weak traffic continued into Q2, citing challenging market conditions. Despite this, First Watch Restaurant Group Inc (NASDAQ:FWRG) outperformed the Black Box Casual Dining segment by more than a percentage point, reflecting its strong industry position.
What about Q2 results posted in August?
The company’s profits in the quarter rose by just a penny compared to last year. The initial market reaction to the guidance caused shares to drop in premarket trading; however, they later rebounded impressively, gaining double digits and ending a three-day losing streak.
System-wide sales rose by 10.1%, although same-restaurant sales growth was down 0.3% and same-restaurant traffic declined by 4% year-over-year. Total revenue climbed 19.5% to $258.6 million, surpassing estimates by $950,000. This resulted in an increase in the restaurant-level operating profit margin to 21.9% and an operating income margin of 6.4%. Adjusted EBITDA grew by $9.5 million to reach $35.3 million.
For FY24, First Watch Restaurant Group Inc (NASDAQ:FWRG) updated its projections, expecting same-restaurant sales growth to fall between negative 2.0% and flat, with same-restaurant traffic growth anticipated in the negative mid-single digits. This is a revision from previous guidance, which forecast flat to 2% growth for same-restaurant sales and low single-digit declines for traffic. Total revenue for FY24 is expected to rise by 17% to 19%, with adjusted EBITDA targeted between $106 million and $112 million, both unchanged from prior guidance.
9. AST SpaceMobile Inc (NASDAQ:ASTS)
Number of Hedge Fund Investors: 15
AST SpaceMobile Inc (NASDAQ:ASTS) is another stock Jim Cramer believes has run too much. When asked about the stock in a recent program on CNBC, Cramer said it’s “too hot.”
Texas-based AST SpaceMobile aims to provide cellular broadband coverage globally through a network of large, high-powered satellites in low Earth orbit, offering connectivity even in remote areas. The company is currently assembling and testing its first generation of BlueBird satellites. However, the stock trades at a steep price-to-book ratio of 29.74, far above sector peers, raising concerns for investors.
As a growth company, it faces significant risks, including market overvaluation and competition in the mobile satellite services space, which is already highly competitive. While the company claims to be the “first and only” cellular broadband provider from space, it will face rivals as the business matures. The high global demand it anticipates may not materialize, as technology evolves rapidly.
Losses are expected to persist in the near term, with revenue forecast at $4.3 million for this year and a loss of $1.14 per share. By 2025, revenue is projected to reach $148 million, though losses will likely continue at 63 cents per share.
While profitability is not expected until 2028, the stock might not be a good option for those looking for early returns.
8. FTAI Aviation Ltd (NASDAQ:FTAI)
Number of Hedge Fund Investors: 33
Jim Cramer was recently asked about FTAI Aviation in a latest program on CNBC. Here was his response:
“That stock is too hot for me. I would prefer to be in RTX. I think it is a better buy. I understand this is a momentum stock. I’m not going to say people don’t play it, but it is too expensive for me.”
FTAI Aviation Ltd (NASDAQ:FTAI) specializes in owning, leasing, and managing aviation equipment, such as aircraft and engines, as well as offshore energy equipment, supporting global transportation of goods and people.
FTAI shares have gained a whopping 300% over the past year, hence the concerns about its valuation. Boeing and Airbus are falling behind on delivery schedules, driving demand for aftermarket services to keep older planes flying. This puts pressure on the engine supply chain, which is where FTAI Aviation excels. The company focuses on leasing and manufacturing parts for the CFM56 and V2500 engines used in Boeing 737s and Airbus A320s, while also gaining exposure to wide-body aircraft.
FTAI Aviation Ltd (NASDAQ:FTAI) has raised its 2024 EBITDA target from $675-$725 million to $825-$850 million, with its 2026 goal increased to $1.25 billion. The company’s growth phase, driven by demand for its engine pools, continues, though it is expected to shift focus to shareholder returns in the future. FTAI’s current high leverage and stock price suggest a stretched valuation.
Columbia Acorn Fund stated the following regarding FTAI Aviation Ltd. (NASDAQ:FTAI) in its Q2 2024 investor letter:
“FTAI Aviation Ltd. (NASDAQ:FTAI) is an aviation leasing, maintenance and repair company that has built a unique business model, with exposure to the most attractive part of the aerospace aftermarket today — the CFM56 jet engine (sole-sourced engine for the Boeing 737 family and one of the two engine options for the Airbus A320 family). CFM56 engines are the largest engine market, with more than 22,000 engines manufactured and more than 21,000 in service today. FTAI’s strategic partnerships with Lockheed Martin and other engine manufacturers provide a significant moat. The company is well positioned to take advantage of the utilization of engine leasing assets due to strong demand, as airline traffic continues to pick up amid asset scarcity.”
7. Rivian Automotive Inc (NASDAQ:RIVN)
Number of Hedge Fund Investors: 37
Rivian Automotive Inc (NASDAQ:RIVN) recently cut its production guidance citing parts shortage. Commenting on the development, Cramer said:
“I want to believe that Rivian is right; I believe they’re terrific and have the backing of Amazon. I want to believe they’re right that it’s a part and not a demand. This sector, away from Tesla, is sheer hell right now.”
Jim Cramer seemed reluctant to fully accept that this was a parts problem since he said no one in the industry is having parts shortage issues because supply-chain headwinds are now behind us. However, he called the company “terrific.”
Rivian Automotive Inc (NASDAQ:RIVN) indeed deserves a wait-and-see approach. As of the end of Q2, Rivian reported $7.88 billion in cash and $5.53 billion in debt, resulting in a net cash position of $2.35 billion. The company recorded a free cash flow burn of $2.56 billion in the first half of FY24, largely attributed to significant capital expenditures aimed at transitioning its manufacturing operations. Adjusted EBITDA losses for the same period were lower, at $1.66 billion. The company has maintained an adjusted EBITDA loss forecast of $2.70 billion. This suggests that losses in the second half will amount to $1.04 billion, reflecting a 33% improvement over the first half, driven by cost savings from its second-generation R1 vehicles.
Rivian Automotive Inc (NASDAQ:RIVN) current cash reserves, coupled with additional investments from Volkswagen—which will help offset substantial R&D costs associated with launching the R2 model—should provide the company with a sufficient runway through 2026 and beyond.
Meridian Hedged Equity Fund stated the following regarding Rivian Automotive, Inc. (NASDAQ:RIVN) in its Q2 2024 investor letter:
“Rivian Automotive, Inc. (NASDAQ:RIVN) is a US-based electric vehicle manufacturer focused on the design, development, and production of electric adventure vehicles, pickup trucks, and commercial delivery vans. We own Rivian because we believe the company is a future leader in the growing electric vehicle market with a strong brand, compelling products, and a vertically integrated business model. During the quarter, Rivian’s stock price was driven by its progress on cost reduction initiatives and management’s stated confidence in achieving positive gross margins by the end of 2024. The recent announcement of a joint venture with Volkswagen, involving up to $5 billion in investment, also significantly boosted Rivian’s financing outlook and validated its technology. We trimmed our position in Rivian given the strong performance in the quarter.”
6. Peloton Interactive Inc (NASDAQ:PTON)
Number of Hedge Fund Investors: 38
Jim Cramer was recently asked about PTON during a program on CNBC. Here is what he said:
“Stop drinking cheap scotch and take the loss coz it’s worth a heck of a lot more than the potential gain of a dollar more when someone figures out they are paying $2 million to buy the whole company.”
Patient Capital Opportunity Equity Strategy stated the following regarding Peloton Interactive, Inc. (NASDAQ:PTON) in its first quarter 2024 investor letter:
“Peloton Interactive, Inc. (NASDAQ:PTON) declined in the first quarter, hitting its lowest per share valuation in late March since becoming a public company. The company has taken drastic action to right-size the extremely bloated cost structure, expand sales channels (Amazon, Dick’s Sporting Goods), and test other ways to reinvigorate growth. The company is hyper focused on reaching positive free cash flow generation, but the path was pushed out. We continue to believe the value of the business lives in the high-margin, sticky subscription piece of the business. We think at current valuation, the company will either successfully turn things around or be a take-out target.”
5. Shopify Inc (NYSE:SHOP)
Number of Hedge Fund Investors: 56
A caller recently asked Jim Cramer whether he’s still bullish on Shopify. Cramer said yes and made the following comment:
“I think that Shopify Inc (NYSE:SHOP) is at a great level to buy. I think Harvey Finkelstein (company President) is doing a terrific job. The stock should be perfect.”
Shopify Inc (NYSE:SHOP) threw it out of the park with its stunning Q2 results. Free cash flow in the period rose a whopping 240% to $333 million. The company saw a 21% year-over-year revenue growth, driven by a 22% increase in gross merchandise volume (GMV) to $67.2 billion, though GMV growth slowed slightly from the previous quarter. The Subscription Solutions segment, which includes all subscription plans, saw a 27% increase in revenue to $563 million. This segment benefits from potential price hikes, which accelerated growth last year. Merchant Solutions, Shopify’s largest revenue contributor, generated $1.48 billion, reflecting a 19% year-over-year increase.
Shopify expects third-quarter revenue to grow in the low-to-mid-20s percentage range, surpassing the consensus estimate of 21%. While SHOP’s forward P/E is high, hovering near 60, the stock bulls believe the company’s EPS growth expectations of about 43% and Shopify’s rapid expansion in gross merchandise volume and free cash flow justify this valuation.
BofA added Shopify Inc (NYSE:SHOP) to its list of the best of breed stocks for the third quarter of 2024. Wall Street continues to shower positive ratings and comments for the Canadian ecommerce store platform Shopify Inc (NYSE:SHOP). Goldman Sachs analyst Gabriela Borges upgraded the stock to Buy from Neutral and increased their price target for SHOP to $74, saying Shopify Inc (NYSE:SHOP) investments in marketing are “about to pay off” and will drive revenue growth into 2025.
JPMorgan started covering the stock with an Overweight rating. Analysts at JPMorgan said Shopify Inc’s (NYSE:SHOP) competitive advantages include product breadth, ease of use and scale. These moat points, according to the bank, will keep powering Shopify’s “industry-leading” growth.
Rowan Street Capital stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q2 2024 investor letter:
Shopify Inc. (NYSE:SHOP) has been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company’s growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it’s still growing at these high rates.
We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired…” (Click here to read the full text)
