We recently published an article titled, Jim Cramer’s Latest Stock Picks. In this article, we are going to take a look at where Cheniere Energy, Inc. (NYSE:LNG) stands against other stock picks by Jim Cramer.
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.
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).
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.
Overall, LNG ranks 4th on our list of latest stock picks by Jim Cramer. While we acknowledge the potential of LNG 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 LNG 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.