We recently compiled a list of the Jim Cramer’s 10 Handpicked Stocks to Watch. In this article, we are going to take a look at where Dicks Sporting Goods Inc. (NYSE:DKS) stands against Jim Cramer’s other handpicked stocks.
In a recent episode of Mad Money, Jim Cramer expressed concern that there’s too much negativity in the market despite recent movements. He pointed out that while the Dow gained 38 points on Wednesday, the S&P fell 1.16%, and the NASDAQ dropped 3%, people seemed overly focused on what was going wrong. Although he’s not calling it a market bottom, he suggests it’s worth paying attention to what’s going right.
“On a day when the Dow inched up 38 points, the S&P dipped 1.16%, and the NASDAQ declined 3%, I’m willing to declare that there’s too much doom and gloom out there. Look, I’m not trying to call a bottom, let’s make that crystal clear, but I think it’s worth taking a hard look at what’s actually going right—not just what’s going wrong.”
Cramer emphasized that even though the market has been strong this year, heading into a historically tough election season and the worst month of the year means it’s not the time to declare everything is fine. He noted that according to his trusted S&P oscillator, which measures overbought or oversold conditions, the market isn’t oversold yet, so it’s risky to go all-in.
“Sure, the market’s up a lot this year as we head into a tricky election period and historically the worst month of the year. So, only a fool would ring the all-clear bell. Plus, we aren’t even oversold yet—at least not according to the S&P oscillator I swear by, which gauges whether there’s too much buying or selling compared to normal times. You don’t go all-in when the market is overbought like it is now; that rarely works.”
Cramer also countered the idea that a recession is inevitable due to the Federal Reserve’s struggle to control the economy. He agreed the economy is slowing, which is why consumer packaged goods and utility stocks are rallying while more sensitive sectors are struggling.
“At the risk of sounding too bullish, let me refute some of the biggest and baddest stories out there. First, let’s tackle the popular narrative that the economy is slowing at a faster pace than the Federal Reserve can control, leading to an inevitable recession. That’s why consumer packaged goods stocks and utilities are rallying while economically sensitive stocks have been crushed. I won’t deny that the economy is weakening.”
However, he stressed that a Fed rate cut is meant to counter economic weakness, not strength, and hoping for a rate cut while ignoring the downturn is unrealistic. He added that if the upcoming labor report is weak, recession-proof stocks may surge, but if it’s strong, hopes for a rate cut will fade.
“But let’s be realistic: You can’t hope for a Fed rate cut without acknowledging that there’s going to be some economic fallout. The Fed doesn’t cut rates when business is booming. That’s foolish thinking. Rate cuts are meant to combat economic weakness, not strength. If Friday’s labor report is weak, sure, we might see a huge rally in the so-called “recession-proof” stocks. But if the non-farm payroll number is too strong, forget about any rate cut hopes. You can’t have it both ways.”
Our Methodology
The article summarizes a recent episode of Jim Cramer’s Mad Money, where he discussed and recommended several stocks. This article focuses on ten companies that Cramer highlighted and examines how hedge funds perceive these stocks. The companies are ranked based on their level of hedge fund ownership, starting with the least owned and moving 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 customer in a specialty concept store wearing a full outfit of apparels and sports gear.
Dicks Sporting Goods Inc. (NYSE:DKS)
Number of Hedge Fund Investors: 34
Jim Cramer was surprised by the reaction to Dicks Sporting Goods Inc. (NYSE:DKS)’s latest earnings report. He initially thought Dicks Sporting Goods Inc. (NYSE:DKS) had a strong quarter, but the stock dropped more than 10% in response. The quarter was indeed impressive as Dicks Sporting Goods Inc. (NYSE:DKS) achieved 4.5% same-store sales growth, surpassing the expected 3.4%, and reported net sales and earnings per share well above forecasts. EPS hit $4.37, exceeding expectations by 51% and showing a 55% increase year-over-year. Despite Dicks Sporting Goods Inc. (NYSE:DKS)’s decline, Cramer remains optimistic. He believes the drop might be due to profit-taking, as the stock had risen substantially before the earnings report.
“What just happened with Dick’s Sporting Goods? This morning, I thought they reported a great quarter, but the market sent the stock down more than 10%. That’s insane! The quarter was strong—Dick’s delivered 4.5% same-store sales growth when the Street was only expecting 3.4%. Net sales were higher than anticipated, and earnings per share came in at $4.37, 51% higher than expected, and up 55% year-over-year. Pretax margins jumped from 10.1% last year to 13.9% this year—that’s very hard to do. In short, the company is firing on all cylinders. Plus, they raised part of their full-year forecast for the second quarter in a row, boosting their same-store sales outlook and earnings guidance.
I’m feeling pretty sanguine about Dick’s after the quarter—certainly more than the market seems to be. Although the stock has already recovered more than half of its losses from this morning’s 10.6% beatdown, at these levels, Dick’s is trading for less than 16 times this year’s earnings estimates. It’s a cream-of-the-crop retailer, and I think it has a lot more room to run.
I think Dick’s sold off today because it was up huge going into the quarter, and profit-takers were simply looking for an excuse to sell. After the selloff, though, I say you’re getting a fabulous buying opportunity in a stock that deserves to be substantially higher. Amid the gloom caused by conservative guidance—which is what we got here—you see what people think is hard gospel when it might just be a need to play it close to the vest in an obviously uncertain time.”
Dicks Sporting Goods Inc. (NYSE:DKS) is set for continued growth, demonstrated by its solid Q2 2024 financial performance and strategic moves. Dicks Sporting Goods Inc. (NYSE:DKS) reported a 5% increase in revenue, reaching $3.35 billion, driven by a 4.5% rise in same-store sales and a 7% boost in average transaction value. Its net income grew to $232 million, or $2.28 per share, exceeding analysts’ expectations.
A major factor in this success is Dicks Sporting Goods Inc. (NYSE:DKS) investment in its online platform, which led to a 15% increase in e-commerce sales. Additionally, Dicks Sporting Goods Inc. (NYSE:DKS)’s focus on private label products has improved profit margins. Recent news highlights a new partnership with a top athletic brand and plans for new store openings, showing confidence in further growth.
Dicks Sporting Goods Inc. (NYSE:DKS)’s commitment to sustainability, including efforts to reduce its carbon footprint and use more recycled materials, aligns with current consumer preferences for eco-friendly practices. These factors make Dicks Sporting Goods Inc. (NYSE:DKS) a strong investment choice with promising growth prospects.
Overall DKS ranks 7th on our list of Jim Cramer’s handpicked stocks to buy. While we acknowledge the potential of DKS 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 DKS 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.