We recently compiled a list of the Jim Cramer’s Bold Predictions About These 10 Financial Stocks. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-B) stands against the other financial stocks Jim Cramer talked about.
Before and after the Federal Reserve’s interest rate cut earlier this month, Jim Cramer had plenty to say on the subject matter. Ahead of the Fed’s announcement, the CNBC host wondered why investors were reading too much into the Fed’s interest rate cut decisions. In an episode of Squawk on the Street, Cramer stated that it wasn’t clear to him why “people want to be very concerned about the future after the cut, I really am not buying any of this.” Another pressing issue that’s caught his attention is the incoming Trump Administration’s proposed tariffs against China and other US trading partners.
He linked tariffs with interest rate cuts and the consumer price index (CPI) or inflation. One of the biggest concerns among analysts and economists, when it comes to tariffs, is the extent to which they might influence prices. Cramer believes that the Fed might not cut interest rates if the tariffs cause prices to rise. On the flip side, he added that if there aren’t any tariffs or if the incoming administration is selective about them, then the housing market might pick up again and auto sales could rise.
Additionally, Cramer also speculated that even if the tariffs did cause inflation, “a year we’ll be sitting here and saying well, okay we had this blip up inflation but that’s over.” As a result, he believes that investors should focus more on the Trump administration’s policies instead of the Fed. “Why do we have to focus so much on what’s going to happen next year for the Fed when they actually have to react to what the President does?” he asked.
The need to focus on the Fed did become clear soon after Cramer’s comments. In a highly watched mid-December decision, Fed Chairman Jerome Powell announced that while his organization was cutting interest rates by 25 basis points, it might cut rates just twice in 2025 as opposed to the earlier guidance of four cuts. On the day Chair Powell updated investors about the bank’s outlook, the flagship S&P, the Dow, and the broader NASDAQ stock indexes lost 2.95%, 2.58%, and 3.56%, respectively.
Cramer, unsurprisingly, wasn’t short on words when it came to dissecting the Fed’s decision. Speaking on Mad Money on the day of the rate cut, he shared that Powell was caught off guard by having to fulfill market expectations of an interest rate cut that might not be justified given the strength of the US economy. According to Cramer, when it came to the rate cut the “data didn’t back it up. It would have been much better off if they had explicitly taken a wait-and-see approach before this meeting. This time they telegraphed the wrong thing. Hence today’s meltdown.”
The next day, he shared that it would have been better if the Fed hadn’t “set us up, not told certain people in the media, whatever, that we need a cut.” Yet, even though Cramer believes that America’s economic strength did not warrant an interest rate cut, he isn’t convinced that the economy is strong all over. On Squawk on the Street ahead of the interest rate cut, Cramer wondered where the Atlanta Fed had gotten its 3.2% US GDP growth estimate for Q4.
“I don’t know where these people get that things are strong, they look at the aggregate numbers, I look at the individual companies, I am trying to find companies that are strong,” he outlined and added that he’s “trying to find why. I’m trying to find where” the GDP is growing by 3.2%. Cramer speculated “travel’s very strong yeah. Leisure’s very strong. Dining out’s very strong. These are strong and by the way, they’re very obvious, they look obvious to the Atlanta Fed. I don’t know what kind of weighting they have but wow.”
Cramer’s comments about the economy and the Fed’s future actions are particularly important when we talk about financial services stocks. These firms typically do well when consumer spending isn’t constrained by inflation and interest rates are low to facilitate business lending, deal-making, and other activities. For a detailed look at how Trump’s win could affect the banking sector, you should check out 10 Best Bank Stocks To Invest In For the Long Term.
Our Methodology
To compile our list of Jim Cramer’s bold predictions about financial stocks, we scanned the stocks he mentioned in Mad Money and Squawk on the Street as far back as in August. Then, we picked out financial stocks and ranked them by the number of hedge funds that had bought the shares in Q3 2024.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds invest in? 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).
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders In Q3 2024: 120
Date of Cramer’s Comments: 09-05-24
Performance Since Then: 1.81%
Berkshire Hathaway Inc. (NYSE:BRK-B) is Warren Buffett’s investment holding company with stakes in a variety of businesses. The firm’s largest business is its insurance division closely followed by its utility and energy operations. Despite the well-diversified business model with stakes in railroad, construction, and energy, Berkshire Hathaway Inc. (NYSE:BRK-B) nevertheless depends on robust economic performance for its share price gains. Therefore, it was unsurprising that the stock fell by 2% after the Fed’s interest rate decisions and soared by 5.4% after the November election. Here’s what Cramer said in September:
“When is it a bad time to buy Berkshire? Buy some tomorrow. I think it’s terrific. Then, wait until it comes down and buy some more.”
Overall BRK-B ranks 2nd on our list of the financial stocks Jim Cramer talked about. While we acknowledge the potential of BRK-B as an investment, our conviction lies in the belief that some 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 BRK-B 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.
Disclosure: None. This article is originally published at Insider Monkey.