We recently compiled a list of the Jim Cramer on AMD and Other Stocks. In this article, we are going to take a look at where Cadence Design Systems, Inc. (NASDAQ:CDNS) stands against the other stocks Jim Cramer is talking about.
Jim Cramer, the host of Mad Money, expressed concerns about the impact of rising bond yields on the stock market, suggesting that this trend could restrict the recent tech rally and limit broader sector gains. On Tuesday, he remarked that the bond market is creating significant disruptions, stating:
“Bonds are wrecking the narrative, driving the people outta everything that works when the Fed cuts rates and they’re going right back into tech. That’s the opposite of what, if you’re a true bull, you want to see.”
READ ALSO Jim Cramer’s Latest Game Plan: 20 Stocks to Watch and Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch
Despite the Dow experiencing a modest decline of 155 points, the S&P 500 managed a slight increase of 0.16%, while the NASDAQ achieved a record close with a 0.78% rise on Tuesday. Cramer pointed out that the market is becoming increasingly narrow and exclusive, primarily benefiting tech stocks at the expense of broader participation, which he considers unhealthy. Cramer explained that this trend was somewhat anticipated.
He recounted how, when news broke about the Fed potentially implementing a 50 basis point rate cut, there was a surge of enthusiasm among investors who began buying bonds. They were betting on a series of rapid rate cuts, leading to expectations that bond yields would fall. Cramer noted, “It seemed a total legit thing, right? I mean the economy was slowing, that’s been the pattern historically.” He added that as inflation began to ease, it appeared that history was repeating itself.
However, following the significant rate cut on September 18th, something unusual occurred: long-term rates rose for the first time since 1995. This shift, which he described as a “total buzzkill,” is beginning to manifest in corporate earnings reports. He went on to say:
“If the bond market doesn’t start behaving, or at least calming down, if longer-term interest rates don’t stop going up, we’re going to start losing the groups that have led us higher for months now.”
In conclusion, Cramer warned:
“If it [the bond market] doesn’t stop its retreat, then we’re gonna start questioning the idea that the Fed will keep cutting rates, ushering in a fabulous economy for 2025, which is what I was looking for.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episode of Mad Money on October 29. 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).
An office of software engineers and designers collaborating on a digital project.
Cadence Design Systems, Inc. (NASDAQ:CDNS)
Number of Hedge Fund Holders: 64
Cramer likes Cadence Design Systems, Inc. (NASDAQ:CDNS) and commented that it reported surprising numbers in its recent earnings report.
“We got this unbelievable set of numbers last night from some outfit you haven’t heard of, but I studied pretty closely for the last 30 years, called Cadence Design Systems. An incredibly good semiconductor design software company goes arm in arm with Nvidia, it sent the whole group flying.”
Cadence Design (NASDAQ:CDNS) is a significant player in the global semiconductor industry, providing a comprehensive range of software, hardware, services, and reusable integrated circuit (IC) design blocks. On October 28, it announced its third-quarter results, showing accelerating growth and a positive outlook for the upcoming quarter.
During the third quarter, the company experienced a revenue increase of 19%, reaching $1.215 billion. It slightly exceeded market expectations, while non-GAAP earnings per share rose by 30.2% to $1.64, significantly surpassing analysts’ consensus forecasts. The growth marked a substantial improvement compared to the prior quarter, which had seen a 9% revenue increase.
A strong area of growth was observed in the system design and analysis segment, which reported a remarkable 47% increase. This surge shows heightened demand for AI-driven optimization and advanced modeling tools. Cadence Design’s (NASDAQ:CDNS) intellectual property (IP) business saw revenue growth of 59%, further highlighting the company’s strong position in this area. Another noteworthy aspect of the quarter was the performance of the Cadence.AI portfolio, which nearly tripled in revenue.
Overall CDNS ranks 3rd on our list of stocks Jim Cramer is talking about. While we acknowledge the potential of CDNS 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 CDNS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.