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 D.R. Horton, Inc. (NYSE:DHI) 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).
A construction site of a multi-family residential complex, a modern urban skyline in the background.
D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 62
On Tuesday, during Mad Money’s episode, Cramer said that D.R. Horton, Inc. (NYSE:DHI) stock “absolutely imploded” despite the fact that the company is a big operator in its industry.
“This excellent operator which builds predominantly starter homes, if you can call $400,000 a starter home, reported a clear top and bottom line miss with weaker-than-expected revenues, 5% revenue shrinkage, and earnings down 12% year-over-year. Ouch. But as bad as the headline numbers were, it was the forward-looking metrics that really hurt.”
Cramer noted that the company reported a modest year-over-year increase in net sales orders, rising just 1% to slightly over 19,000 units. He highlighted that Wall Street had forecasted orders to exceed 20,000, indicating a shortfall in expectations. Additionally, Cramer remarked that the value of these net sales orders declined by 2%, falling short of forecasts. Even more concerning was the significant drop in the company’s sales order backlog, which decreased by 19%.
“Horton’s forecast for the 2025 fiscal year, the 12-month period that ends next September, came in pretty light. They’re expecting 90,000 to 92,000 closings, the analysts were looking for 94,000. They’re talking $36-$37.5 billion in revenue, Wall Street was looking for $39 billion. That’s a big miss. Basically, Horton’s projecting closings up just 1.5%… Those are not the numbers that I wanted to see from a home builder in a world where the Fed’s cutting rates.”
Cramer expressed no surprise at the stock’s significant drop of over 7% on Tuesday, noting that it had actually fallen even further at one point. He remarked that the decline was justified, suggesting that the stock could have seen an even steeper fall. Cramer anticipates a wave of downgrades in the days ahead.
“On the conference call, CEO Paul Romanowski pinned the weaker number on “the volatility of rates” and buyers’ expectations that rates will be lower next year. In fact, management referred to a pause three separate times in the conference call, with COO Michael Murray describing a very choppy selling environment in the quarter with a buyer that seems on pause until mortgage rates come down. It makes sense to me. And remember, these guys are really good operators. We’re not dealing with some company that gets it chronically wrong. We’re talking about something that gets it chronically right.”
D.R. Horton (NYSE:DHI) has a track record of closing over 1,100,000 homes and operates in 125 markets across 36 states. For fiscal 2025, its management has projected revenues between $36 billion and $37.5 billion, along with plans for closing between 90,000 and 92,000 homes. This outlook shows a recalibration of previous targets, considering the ongoing challenges in the housing market.
Despite these adjustments, D.R. Horton (NYSE:DHI) management emphasizes a commitment to strategic land acquisitions and careful inventory management, aiming to sustain growth and optimize operations across different regions. Management also highlighted the importance of maintaining adaptable financial operations to address fluctuations in interest rates and issues related to affordability.
Overall DHI ranks 4th on our list of stocks Jim Cramer is talking about. While we acknowledge the potential of DHI 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 DHI 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.