We recently compiled a list titled Jim Cramer’s Top 10 Stocks to Track for Potential Growth. In this article, we will look at where CAVA Group, Inc. (NYSE:CAVA) ranks among Jim Cramer’s top stocks to track for potential growth.
In a recent episode of Mad Money, Jim Cramer points out the surprising strength in the market, noting that many companies are performing better than Wall Street recognizes. He argues that people should stop doubting these companies every time there’s a negative data point. Cramer highlights the impressive management and execution by CEOs, which often goes unnoticed.
“Suddenly, all is forgiven, or if not all, then at least most. I’m talking about the incredible resilience in this market, buoyed by a recognition that many companies are simply better than Wall Street gives them credit for. We need to stop turning against them every time there’s a seemingly bad data point. Every day I come to work, I’m dazzled by the resourcefulness of executives who do their best to create value for you, the shareholder. Lots of stocks went up on days like today when the Dow advanced 335 points, the S&P gained 75%, and the NASDAQ jumped 1.0%, all thanks to good management and excellent execution that often goes unnoticed.”
While Cramer acknowledges that some CEOs deserve skepticism, he emphasizes that many are outstanding and deserve recognition for their hard work. He criticizes the focus on short-term economic indicators and emphasizes that great companies aren’t distracted by minor fluctuations.
“Listen, I’m not a pushover. I can hit CEOs with tough questions when needed, some of them deserve skepticism and scorn. But there are also plenty of brilliant, hardworking CEOs with incredible teams, and you ignore their hustle at your own peril. This often gets lost in the shuffle when we’re focused on the parlor game of guessing the Fed’s next move—a quarter point, half a point, quarter, half. You know what I say? Let’s get serious. Terrific companies don’t get caught up in that quarter-half shuffle.”
Cramer explains how Kroger CEO Rodney McMullen has led the supermarket chain to success despite challenges, including resistance to its acquisition of Albertsons and a tough economic environment. McMullen has managed to keep food costs down and deliver strong results through effective strategies like a superior loyalty program and regional store improvements. Despite high food prices, the company’s stock rose more than 7% following a positive earnings report, showcasing the company’s successful turnaround.
“CEO Rodney McMullen has managed to keep food costs down and deliver fantastic numbers, all while maintaining an expensive, unionized labor force in a very uncertain commodity environment. How? The company confounded critics by developing a superior loyalty program, regionalizing their stores, and creating some of the best private-label products out there, second only to Costco. Food is still expensive, but cooking at home is far cheaper than dining out. McMullen tells us that consumers are no longer flush with cash, especially his most budget-conscious clientele. He notes, “Budget-conscious customers are buying more at the beginning of the month to stock up on essentials, and as the month progresses, they become more cautious with their spending.”
Wow, that’s a tough environment. When I heard this, I thought back to the old company, the one that used to miss its numbers whenever the environment got a little tough. Everybody else remembers the old company too, which is why the stock was just sitting there waiting to be picked up, until this quarter’s report, after which it soared more than 7% in response to the fabulous results. Everyone thought the company would drop the ball, as they used to, but McMullen has finally whipped his supermarket into shape.”
Cramer contrasts this with the tech industry, where complex details often lead Wall Street to misunderstand a company’s true potential. He believes that in tech, analysts frequently overlook the expertise and capabilities of CEOs who have a deep understanding of their businesses.
“We all need to eat, so it’s not hard to understand the grocery business. But it’s quite different when it comes to tech, where analysts constantly doubt the resolve and expertise of CEOs who simply know more about their businesses than the critics. In tech, the complexity often leads Wall Street to conclusions that have little to do with reality.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he discussed several stocks. We selected and analyzed ten companies from that episode and ranked them by the level of hedge fund ownership, from the least to the most owned.
At Insider Monkey we are obsessed with 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).
A close-up image of a colorful salad platter with toppings and dressings.
CAVA Group Inc. (NYSE:CAVA)
Number of Hedge Fund Investors: 33
Jim Cramer highlights CAVA Group, Inc. (NYSE:CAVA) as an example of a stock with remarkable growth. He initially recommended CAVA Group, Inc. (NYSE:CAVA) when it was priced at $32, and it has since surged to over $125, driven by several strong quarterly reports. Cramer points out that CAVA Group, Inc. (NYSE:CAVA) is up 192% just since the beginning of the year, showcasing its momentum. Cramer believes these figures, especially the rise in traffic, are exactly what investors want to see in the current market environment.
“Some stocks just don’t know when to quit. Take CAVA Group, Inc. (NYSE:CAVA), the fast-casual Mediterranean chain that went public a year ago. I started recommending this one at $32, and now it’s trading at $125 and change, thanks to a series of strong quarters. Heck, it’s up 192% just since the beginning of the year. The last time CAVA Group, Inc. (NYSE:CAVA) reported, toward the end of August, they delivered a tremendous quarter—14.4% same-store sales growth, mostly fueled by a 9.5% uptick in traffic, which is exactly what you want to see in this environment. So, can the stock keep climbing?”
CAVA Group, Inc. (NYSE:CAVA) is an attractive investment option due to its strong financial performance, rapid expansion, and positive outlook in the fast-casual restaurant industry, especially in Mediterranean cuisine. In Q2 2024, CAVA Group, Inc. (NYSE:CAVA) exceeded expectations with earnings per share of $0.17 and revenue of $233.5 million, demonstrating its ability to grow quickly while staying profitable.
CAVA Group, Inc. (NYSE:CAVA)’s aggressive expansion plan—opening 14 new restaurants in Q1 2024 and aiming to add 50-54 locations this year—positions it to capture more of the growing Mediterranean market. Analysts are optimistic, with firms like TD Cowen and Morgan Stanley(NYSE:MS) raising their price targets, reflecting strong confidence in CAVA Group, Inc. (NYSE:CAVA)’s growth. Additionally, CAVA Group, Inc. (NYSE:CAVA)’s improved restaurant-level margins and same-store sales growth highlight its operational efficiency and profitability.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
Overall CAVA ranks 7th on the list of Jim Cramer’s top stocks to track for potential growth. While we acknowledge the potential of CAVA as an investment, 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 CAVA 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 was originally published on Insider Monkey.
