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)
4. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 85
Talking about Tesla Inc (NASDAQ:TSLA) and the robotaxi event in a latest program on CNBC, Cramer called the upcoming vehicles “huge.”
“The robo-taxi is significant because it’s gaining traction in many different cities. When that happens, I think people will realize it’s much cheaper than Uber. So, if you’re willing to take the plunge, you can save 30% on Uber if you take Waymo,” Cramer said.
However, many believe Tesla Inc (NASDAQ:TSLA) won’t be able to live up to the hype around its robo taxi plans. Each robo taxi is expected to have a price target of around $150K to $200K, with some estimates suggesting Tesla Inc (NASDAQ:TSLA) would need about $35 billion to develop a global fleet of such cars. Amid inflation and lack of preference for electric cars, American families will probably stay away from spending a fortune on robo taxis, which could cause a blow to Tesla Inc’s (NASDAQ:TSLA) plans in the future.
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)
3. PayPal Holdings Inc (NASDAQ:PYPL)
Number of Hedge Fund Investors: 87
Jim Cramer was recently asked about Kaspi.kz AO – ADR. He said it’ a “good company” but recommended PayPal as a better buy.
“This is FinTech. This is a good company. I prefer, right now, I have been watching PayPal Holdings Inc (NASDAQ:PYPL). Similar business, better value.”
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. Its 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.”
2. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 103
Jim Cramer shared his thoughts on Netflix in a latest program on CNBC:
“Netflix is incredible. You can monetize the ads, and the new slate is really good. What can I say? Netflix is fantastic.”
Barclays recommends Netflix Inc (NASDAQ:NFLX) as a stock to offset risks in the concentrated market where most of the gains are coming from AI stocks. Barclays isn’t alone. Evercore ISI earlier this year said in a note that Netflix Inc (NASDAQ:NFLX) is in “the strongest position financially, fundamentally and competitively that we have ever seen.”
Sensing major threats amid rising competition in the market from Disney Plus, Peacock (CMCSA), Max. Amazon and YouTube, Netflix Inc (NASDAQ:NFLX) has fired all engines and is using a multi-pronged approach to thrive. Netflix Inc (NASDAQ:NFLX) is expanding into emerging markets, aggressively focusing on user engagement and tapping into advertisement and gaming. Netflix Inc (NASDAQ:NFLX) is also expanding into NFL games and WWE. Netflix’s ad-tier now has 40 million global monthly active users, up from 23 million in January.
Polen Focus Growth Strategy stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q2 2024 investor letter:
“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”
1. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 219
Talking about a bullish analyst note on Meta Platforms Inc (NASDAQ:META) during a program on CNBC, Jim Cramer called the new Ray-Brans “the greatest product.”
“Let me give you a positive note today. Meta Platforms Inc (NASDAQ:META), Pivotal (analyst firm), especially regarding Instagram, Reels, and Stories, all of which are expected to come out on top. They recommend buying it with a price target of $780. Keep in mind, this stock is not expensive.”
Meta Platforms Inc (NASDAQ:META) crushed past analyst estimates for its Q2 results, giving signs that the huge AI spending it’s doing would bear more results in the future.
The market has been reluctant about Meta Platforms Inc (NASDAQ:META) massive spending on AI. What does Meta want to achieve with its AI spending? The company wants to use AI to improve engagement and language models like Llama 3 to improve user interactions, boost engagement, and better monetize its 3.2 billion daily active users.
But can Meta Platforms Inc (NASDAQ:META) sustain this high spending? The company’s free cash flow margin is around 30%, and it’s well on track to report $50 billion in free cash flow this year. Based on this target the stock is trading at around 26 times this year’s free cash flow. Given the current trajectory continues Meta Platforms Inc (NASDAQ:META) can post $58 billion in free cash flow by next year, which means the stock is trading at 21 times next year’s free cash flow. With a whopping $35 billion in net cash, a strong user base, and a key position in the consumer-facing side of the AI industry, Meta Platforms Inc (NASDAQ:META) could be a solid long-term investment.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text)
While we acknowledge the potential of Meta Platforms Inc (NASDAQ:META), 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 META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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