On Monday, Jim Cramer of Mad Money took a closer look at the market’s recent movements, reassuring investors that rising bond yields shouldn’t cause excessive worry. He noted that bond yields have surged significantly since the Federal Reserve cut rates last month, a trend that might seem counterintuitive. Cramer acknowledged that bonds were behind Monday’s “ugly action in the big caps”.
The Dow fell by 344 points, the S&P slipped by 0.18%, while the Nasdaq managed a slight gain of 0.27%. Cramer emphasized that while bonds play a crucial role, they aren’t the sole factor influencing the market’s performance, despite what some may claim. He expressed his frustration with those who panic at the sight of rising interest rates, suggesting that such reactions are misguided. Cramer pointed out that the stock market has experienced a remarkable rally.
“The stock market has had a fabulous run, even as bond yields have crept up almost the entire time. They love to ignore that glaring fact, the bears. Every day is groundhog day for them. They see interest rates go up higher, so they panic themselves and they are trying to panic us.”
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Cramer proceeded to break down the arguments typically made by bond bears, who often use long-term interest rates as a weapon against the Fed. He criticized their simplistic approach, where rising rates are blamed on the Federal Reserve while falling rates somehow earn them credit. According to him, the Fed’s recent decision to cut rates by 50 basis points was necessary.
“… Here’s the simple truth, did the Fed need to do a double rate cut moving 50 basis points and not 25? Yes. Yes, they had to do it if they wanted to be sure that the proverbial plane didn’t crash.”
He firmly stated that Jerome Powell, the Fed Chair, is simply fulfilling his duties responsibly, and those who continuously express skepticism will ultimately be proven wrong. Addressing the notion that a rate cut would trigger inflation, Cramer pointed out that the bond market’s reaction suggests that the initial cut has already sparked fears of inflation resurgence.
He challenged the idea that the effects of a rate cut are immediate, asserting that higher loan rates, particularly for 30-year mortgages, can actually have an anti-inflationary effect, contrary to what some might believe. He highlighted that the most pressing concern in the inflation landscape remains housing.
Cramer also tackled the prevailing belief among bears that stock prices cannot rise if interest rates increase. He dismissed this idea as arbitrary, asserting that we are far from a situation where higher rates would definitively damage the bull market.
“We are nowhere near the point where the bull can be slain by higher, longer rates… Stocks have soared with bond yields at these levels before; in fact, they’ve soared with the 30-year at 5%, they’ve soared with the 30-year at 6%, so let’s stop it with the jeremiads.”
Ultimately, he argued that such fears merely drive investors away from solid companies that are performing well.
Jim Cramer on GE Vernova and Others
Our Methodology
For this article, we compiled a list of 13 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 18 and 21. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
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).
13. IonQ, Inc. (NYSE:IONQ)
Number of Hedge Fund Holders: 12
Cramer said that he cannot recommend IonQ, Inc. (NYSE:IONQ) stock. He explained his reasoning as he said:
“That’s a parabolic move. You might be in the middle of [a] parabolic move. That means you got more upside. You might be near the end and you’re going to get clobbered. I cannot recommend that stock on that basis.”
IonQ (NYSE:IONQ) develops general-purpose quantum computing systems in the United States. The company offers access to quantum computers with varying qubit capacities, catering to the growing demand for advanced computational power. Recent developments have significantly impacted the company’s visibility in the market, particularly a major contract signed in September with the U.S. Air Force Research Lab (AFRL) (see 12 Best Quantum Computing Stocks to Buy)
The four-year agreement, valued at $54.5 million is the company’s largest contract for 2024 and boosts the year-to-date order bookings to $72.8 million. Through this collaboration, it aims to improve the scalability and deployment of quantum computing technologies.
However, the pursuit of cutting-edge quantum computing comes with substantial costs. In the second quarter, the company reported a net loss of $37.6 million, driven by research and development expenses that surged 57% year-on-year, climbing to $31.2 million from $19.9 million in 2023.
It should be noted that IonQ (NYSE:IONQ) raised its revenue expectations for the full year 2024 to a range of $38 million to $42 million, with projected revenues of between $9 million and $12 million for the third quarter. Additionally, the company has reaffirmed its earlier stated bookings target of $75 million to $95 million for the full year.
12. AST SpaceMobile, Inc. (NASDAQ:ASTS)
Number of Hedge Fund Holders: 15
Cramer finds AST SpaceMobile, Inc. (NASDAQ:ASTS) stock overvalued and commented that he cannot recommend it.
“Okay. I have felt that that company is overvalued. It’s a telecommunications company with mobile space. I keep waiting for Starlink to come out and then I’d be more involved, that’s the Elon Musk company. I cannot recommend AST SpaceMobile. It doesn’t make any money.”
AST SpaceMobile (NASDAQ:ASTS) is building a space-based cellular broadband network designed specifically for smartphones in the United States. Utilizing low Earth orbit (LEO) satellites, the company aims to provide cellular connectivity for devices operating on 2G, 4G, and 5G networks. The vision is to advance mobile connectivity, especially in areas where traditional cellular infrastructure is lacking.
The company’s initial deployment involves launching five satellites, which will enable a non-continuous cellular broadband service across the United States and select global markets. However, this initial offering will be quite limited. To establish a more comprehensive and reliable service, management estimates that approximately 95 satellites will be necessary.
In the second quarter, AST SpaceMobile (NASDAQ:ASTS) reported total adjusted operating expenses of $34.6 million, an increase of $3.5 million from the $31.1 million reported in the first quarter of the same year. The rise was because of various factors, including a $2.0 million increase in adjusted general and administrative costs, a $1.3 million rise in adjusted engineering services costs, and a $0.2 million uptick in research and development expenditures.
The company provided good news on September 12, when SpaceX’s Falcon 9 rocket successfully launched the first five satellites, referred to as BlueBirds, into low Earth orbit. Abel Avellan, the founder, chairman, and CEO, described this launch as a significant milestone for the company.
11. NuScale Power Corporation (NYSE:SMR)
Number of Hedge Fund Holders: 16
Cramer said that NuScale Power Corporation (NYSE:SMR) is bleeding money. Here’s what he said:
“Yes, again, that’s a small scale nuclear module reactor [company]. And I think that company’s losing a lot of money. You might as well go again with GE Vernova, GEV, because that’s something else to fall back on and you still get the nukes.”
NuScale Power (NYSE:SMR) focuses on the design and sale of modular light water reactor nuclear power plants, aiming to provide energy for various applications, including electricity generation, district heating, desalination, hydrogen production, and process heat. In late 2022, the Utah Associated Municipal Power System (UAMPS) decided to terminate its agreement with the company that dated back to 2015.
The agreement had originally outlined plans for the construction of twelve reactor modules, which were expected to be operational by 2023. However, the estimated costs for this project ballooned from an initial $3 billion to a staggering $9.3 billion, leading UAMPS to reconsider its commitment. Consequently, the company’s plans for its first operational small modular reactor (SMR) were abandoned, resulting in a $50 million charge for the company.
As NuScale Power (NYSE:SMR) moved into the second quarter of 2024, the financial results showed ongoing difficulties. The company recorded revenue of $1.0 million for the quarter, a significant decline from the $5.8 million generated in the same period the previous year. Alongside this revenue drop, it faced a net loss of $74.4 million, which marked a substantial increase from the net loss of $29.7 million reported a year earlier.
10. Dover Corporation (NYSE:DOV)
Number of Hedge Fund Holders: 28
Cramer’s Charitable Trust owns Dover Corporation (NYSE:DOV) shares and one of the reasons he likes the company is its presence in the data center field. He commented on the company and said:
“They report next week. Charitable Trust owns it. I think it’s gonna be a good quarter. It’s also a data play… it’s everything. But the main thing is it’s in the data center. That’s why we like it. A lot of other reasons that are good too.”
Dover (NYSE:DOV) is a diversified global provider of a broad range of products, including equipment, components, consumable supplies, and software solutions. The company serves a variety of sectors, such as automotive, aerospace and defense, waste handling, and clean energy.
On October 16, Oppenheimer raised the price target on the company stock to $215 from $210 and kept an Outperform rating. The firm highlighted the company’s ability to navigate over $300 million in anticipated top-line headwinds in 2024. The assessment noted the company’s ongoing transformation as it shifts away from cyclical capital goods, focusing instead on mission-critical components that are supported by long-term growth trends. The firm mentioned that the company is better positioned than many of its industrial peers to capitalize on potential earnings growth in the near and medium term, especially as the stock trades at appealing multiples.
For 2024, Dover (NYSE:DOV) projects a GAAP EPS between $10.80 and $10.95, with an adjusted EPS expected to be in the range of $9.05 to $9.20. The guidance is based on forecasted revenue growth of 3% to 4%, or 2% to 3% on an organic basis.
9. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 32
Cramer said that he has moved on from Energy Transfer LP (NYSE:ET) trimming its dividend and highlighted that the stock has come up over time.
“Well, you know, it’s actually come up over time. It trades with the whole group and the group is actually trading very, very well. I just say, you know what… When they cut the dividend, people just never forgave them. I was one of them, but I have forgiven them. You’re in good shape with ET.”
Energy Transfer (NYSE:ET) is a key player in the energy sector, focusing on a wide range of services related to natural gas and crude oil transportation. It has an extensive network of interstate natural gas pipelines and it operates numerous facilities in Texas and Oklahoma. The company also owns and manages natural gas storage facilities and processing plants across multiple states.
Currently, it is advancing its Lake Charles LNG project, having entered into a preliminary contract with a consortium to build this significant facility. The agreement is contingent upon the company making a final investment decision, which hinges on securing the necessary regulatory approvals and attracting additional partners.
The Lake Charles LNG project has been in the works for nearly a decade, facing various challenges along the way. Despite these hurdles, the company has established several commercial agreements with LNG buyers, including Shell, to cover most of the proposed 16.5 million tons of annual export capacity.
In 2024, Energy Transfer (NYSE:ET) plans to allocate approximately $3.1 billion toward growth projects. The investment is largely driven by developments associated with WTG Midstream, as well as expedited projects within its crude oil transportation and services division, which has benefited from the recent acquisition of Crestwood.
8. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 35
When Cramer was questioned about Walgreens Boots Alliance, Inc. (NASDAQ:WBA), he said:
“The good news… is that Tim Wentworth is really an excellent CEO. The bad news is you’re up against Amazon… But I’m a believer in Tim. I really hope it works. But that is a one tough spot he’s got himself in.”
Walgreens Boots Alliance (NASDAQ:WBA) is a well-known name in the retail pharmacy industry, operating over 12,500 locations across the United States, Europe, and Latin America. The company’s diverse portfolio features well-known brands such as Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico. In recent times, the company has faced increasing competition from tech-driven retailers like Walmart and Amazon, which are making significant inroads into the pharmacy sector.
These competitors not only offer extensive loyalty programs, such as Walmart+ and Amazon Prime but also provide the convenience of delivering a broad range of items alongside prescriptions. Such a capability may give them an edge in the online marketplace, challenging traditional pharmacy models like Walgreens.
During its latest earnings call, Walgreens Boots Alliance (NASDAQ:WBA) management provided insights into the company’s future direction, highlighting a plan to close 1,200 underperforming stores. The decision shows that there is an awareness of the need to adapt and modernize in a rapidly changing retail environment.
Tim Wentworth emphasized that out of over 8,000 stores, approximately 6,000 are currently profitable, which supports the belief in a retail pharmacy-led model that remains relevant to consumers. The initiative to close less productive locations is expected to reduce fixed costs and free up resources for reinvestment in the remaining stores over the coming years.
7. e.l.f. Beauty, Inc. (NYSE:ELF)
Number of Hedge Fund Holders: 40
Cramer called e.l.f. Beauty, Inc.’s (NYSE:ELF) situation complicated but also guessed that it would return faster than others in the group. Here’s what he had to say:
“Well, remember, this is a very tough situation because all of cosmetics are in a downturn that is so staggering that it caught everybody by surprise, especially Fabrizio Freda at Estee Lauder. I think Estee Lauder is not as good as E.l.f, but I recognize that this group is in the doldrums. I don’t want to make a single call on a group decline. I do think that when they come back, this one will come back faster than all of them.”
e.l.f. Beauty (NYSE:ELF) is a big name in the cosmetics industry and provides a diverse range of cosmetic and skin care products offered under several brand names, including e.l.f. Cosmetics, e.l.f. Skin, Well People, Naturium, and Keys Soulcare. The company has recently reported significant growth, marking a strong beginning to the fiscal year.
Tarang Amin, e.l.f. Beauty’s Chairman and Chief Executive Officer highlighted that the company achieved 50% net sales growth in the first quarter, along with an increase of 260 basis points in market share. The achievement signifies the 22nd consecutive quarter of growth in both sales and market share, positioning the company among a select group of high-growth consumer companies.
In the first quarter of fiscal year 2025, e.l.f. Beauty (NYSE:ELF) generated revenue of $324.5 million, a substantial 50% increase compared to the same period the previous year. Non-U.S. markets contributed significantly to this growth, accounting for 16% of total net sales, with net sales from these markets soaring by 91% year-over-year. The company’s updated outlook for fiscal 2025 expects a year-over-year increase in net sales of 25% to 27%, an upward revision from the earlier expectation of 20% to 22%.
6. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 48
Cramer was asked about Coterra Energy Inc. (NYSE:CTRA) during the lightning round and he enthusiastically said:
“… It’s the one I feel the most confident in. Why? Because it’s half oil, half nat-gas. And it’s a low-cost producer of oil, it’s the lowest-cost producer in the world [of] nat-gas. It can make money even at these levels. Tom Jorden is money. I think you buy the stock. I can’t believe that it’s still independent.”
Coterra Energy (NYSE:CTRA) is an independent oil and gas company that focuses on the exploration, development, and production of oil, natural gas, and natural gas liquids across the United States. CEO Tom Jorden expressed the company’s commitment to diversification and mentioned that it aims to operate in multiple basins and generate varied revenue streams during an OGInterview in June.
Jorden discussed this approach, emphasizing that while it may be tempting to concentrate on a single commodity, the company recognizes the unpredictability of the market. Instead, the company has opted for a strategy that balances its investments between oil and gas while keeping supply costs low.
In the second quarter, Coterra Energy (NYSE:CTRA) reported total equivalent production of 669 thousand barrels of oil equivalent per day, surpassing its initial guidance range of 625 to 655 thousand barrels. It was because of improved cycle times and strong well performance across all operational regions. Additionally, the company adjusted its production guidance for the full year 2024, raising the estimate for total BOE production by 1% and for oil production by 2.4% compared to earlier projections made in May.
5. DexCom, Inc. (NASDAQ:DXCM)
Number of Hedge Fund Holders: 64
Cramer expressed disappointment with DexCom, Inc.’s (NASDAQ:DXCM) last quarter but did remark that the CEO can deliver. Here’s what Mad Money’s host had to say:
“That last quarter was really terrible, I’ve got to tell you. New quarter’s on the horizon. I frankly can’t believe that it could be as bad as the last quarter. And… Kevin Sayer, I think can deliver. But you know what? I lost conviction after that last quarter. I really did.”
DexCom (NASDAQ:DXCM) designs, develops, and commercializes continuous glucose monitoring (CGM) systems aimed at improving diabetes management. Among its flagship products are the Dexcom G6 and G7 integrated CGM systems, which play an important role in helping individuals monitor their glucose levels effectively.
As a prominent player in the CGM market, the company recently achieved a significant milestone by becoming the first company to receive approval for an over-the-counter glucose biosensor. Known as the Stelo, this device was approved by the U.S. Food and Drug Administration for adults aged 18 and older who are not using insulin.
However, it is worth noting that DexCom (NASDAQ:DXCM) management recently adjusted its 2024 revenue guidance, revising expectations from a range of $4.2 billion – $4.35 billion down to between $4 billion and $4.05 billion. Contributing to this shift was the faster-than-anticipated rebate eligibility for the G7 CGM, which affected stock performance.
4. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 65
During the lightning round, a caller asked Cramer if it was a good time to buy Cheniere Energy, Inc. (NYSE:LNG) stock. Cramer responded by saying:
“Yeah. Natural gas price is low, business high, I would buy LNG, absolutely….. Yeah, the stock is up a great deal. But yes, the answer is it’s the right time.”
Cheniere Energy (NYSE:LNG) is a key player in the liquefied natural gas infrastructure sector in the United States, with ownership and operation of both the Sabine Pass LNG terminal in Louisiana and the Corpus Christi LNG terminal in Texas. The company is also involved in marketing activities related to LNG and natural gas. In June, it announced significant updates to its long-term capital allocation plan, referred to as the ‘20/20 Vision.’
The updated plan included an increase in share repurchase authorization by an additional $4 billion through 2027. Alongside this, the company proposed a 15% increase in its quarterly dividend, raising it to approximately $2.00 per common share annually, effective from the third quarter of 2024.
During the first half of 2024, the company executed its capital allocation strategy by repurchasing around 10.7 million shares of common stock for approximately $1.7 billion. Additionally, it made strides in reducing its financial obligations by repaying $300 million of its consolidated debt during the same period.
Furthermore, Cheniere Energy (NYSE:LNG) revised its financial expectations for 2024, raising its guidance for consolidated adjusted EBITDA to a range of $5.7 billion to $6.1 billion, and for distributable cash flow to between $3.1 billion and $3.5 billion.
3. HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 80
A caller expressed to Cramer that they have been having a hard time figuring out the fair price of HubSpot, Inc. (NYSE:HUBS) stock. Cramer agreed, saying:
“It was really hard. I tell you, it’s really, really hard. I mean, it sells [at] a high multiple. I have preferred Salesforce.com with Agent Force.”
The stock has a forward PE of 69.03, which shows a premium of 185.26% compared to its sector. HubSpot (NYSE:HUBS) is a provider of a cloud-based customer relationship management (CRM) platform designed to support businesses in various aspects of customer engagement. The platform has a range of tools that facilitate marketing automation, sales tracking, customer service management, content management, data unification, and B2B commerce.
A significant aspect of its approach is its redefined concept of inbound marketing. The methodology centers on drawing in potential customers by producing engaging and valuable online content, utilizing channels such as social media and blogs to capture interest and foster relationships. The effectiveness of this strategy is reflected in the company’s growth metrics.
In the second quarter, the company reported revenue of $637 million, marking a 20% increase from the previous year. The adjusted EPS reached $2.03, which is a 40% rise. The growth was due to a 23% increase in customer accounts, bringing the total to 228,045. Management has indicated that the total addressable market (TAM) for the company, valued at $51 billion in 2023, is projected to grow to $77 billion by 2028.
Management has provided guidance for the upcoming quarter, forecasting revenue between $646.0 million and $647.0 million, alongside a non-GAAP operating income of $107.0 million to $108.0 million. Furthermore, HubSpot (NYSE:HUBS) has revised its full-year revenue expectations for 2024, now forecasting between $2.567 billion and $2.573 billion, an increase from the prior estimate of $2.550 billion to $2.560 billion. Non-GAAP net income per share is expected to fall between $7.64 and $7.70, an upward adjustment from the previous forecast of $7.30 to $7.38.
2. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 92
When a caller asked Cramer about Vistra Corp. (NYSE:VST), he said:
“… I’ve got to tell you, they’re interchangeable. They have been resting of late. I feel like they’re just resting and then they’ll go higher. But I don’t know when that’s going to happen.”
Vistra (NYSE:VST) is a prominent electricity retail and power generation company, catering to residential, commercial, and industrial customers. The company has a generation capacity of approximately 41,000 megawatts and serves around 5 million clients. In recent years, the company has expanded its operations through acquisitions, including Tricor Group and Energy Harbor, along with Vistra Vision LLC, which is still pending closure.
The company has increased its nuclear capacity to over 6,400 megawatts. This growth in capacity, coupled with recent acquisitions, positions the company to generate more revenue driven by production tax credits (PTCs) in the future. In its Q2 2024 earnings report, the company raised its midpoint guidance for adjusted EBITDA for 2025 from a range of $4.55 billion to $5.05 billion, now expecting between $5.2 billion and $5.7 billion.
On October 22, Seaport Research raised the price target on Vistra (NYSE:VST) to $155 from $126 and maintained a Buy rating. The firm is closely monitoring the valuations and cash generation of both thermal and renewable power independent power producers (IPPs), noting challenges in seeing growth in cash EBITDA among major renewable developers despite substantial annual investments. The firm added that in contrast, thermal IPPs, including Vistra, are expanding gas and nuclear plants under long-term contracts. The company is among the top choices of the firm for thermal and renewable power IPPs.
1. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 92
Cramer thinks that GE Vernova Inc. (NYSE:GEV) will report solid figures in the upcoming quarter. However, he expressed worry that there is a chance that the stock might sell off on good news.
“GE Vernova’s about to report and my problem is that GE Vernova may be one of the situations where it sells off on good news, and I think you are going to get good news because I think the company’s doing incredibly well as Scott Strazik’s doing a terrific job. But remember, this is like one of those companies that is a data center magnet. They have nuclear power… Let’s say just small nuclear reactors, but that won’t be online till 2030. But be aware that they are the way that people are playing the power to the data center.”
GE Vernova (NYSE:GEV) is a prominent player in the energy sector, specializing in a wide range of products and services related to electricity generation, transfer, orchestration, conversion, and storage. The company is set to report its third-quarter earnings result on October 23.
On October 21, Deutsche Bank analyst Nicole DeBlase initiated coverage of the stock with a Buy rating and a $354 price target. The analyst mentioned in a research note that the firm recognizes GE Vernova as a focused entity in power generating capacity, emphasizing that current prospects for power investment have not been this favorable in decades. Projections indicate a remarkable annual growth rate of 63% in adjusted EBITDA through 2027 for the company.
Scott Strazik, the CEO of GE Vernova (NYSE:GEV) highlighted the evolving landscape of the nuclear power industry during his recent appearance at WSJ’s Journal House. He expressed confidence that significant additions to nuclear capacity will commence in the early 2030s, with expectations of “gigawatts upon gigawatts” being added annually. Strazik noted that while the current decade is crucial for validating nuclear technology and achieving operational milestones for initial projects, the 2030s are expected to be transformative for the sector.
Strazik also addressed the company’s offshore wind initiatives, acknowledging the challenges faced during the past summer. He emphasized the long-term significance of offshore wind in the energy transition, aligning its importance with that of small modular reactors and carbon capture technologies. Although recent developments in offshore wind have been tough, the CEO remains optimistic about its role in meeting future energy demands.
While we acknowledge the potential of GE Vernova Inc. (NYSE:GEV) as an investment, 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 GEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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