We recently compiled a list of the Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch. In this article, we are going to take a look at where Lam Research Corporation (NASDAQ:LRCX) stands against the other stocks in Jim Cramer’s watchlist.
Jim Cramer, the host of Mad Money, urged investors to refrain from making any investments in high-value stocks, particularly in the Big Tech sector, ahead of upcoming earnings reports, which will attract considerable scrutiny. Cramer expressed concern over significant price movements in various stocks leading into earnings, stating, “you can’t make up these moves.”
READ ALSO Jim Cramer on Tesla and Other Stocks and Jim Cramer is Talking About These 12 Stocks
He emphasized that these surges create heightened risks for those looking to purchase stocks before a company’s earnings announcement. He pointed out that there is underlying volatility affecting nearly every major company. He noted that the stocks that he mentioned on Friday were trading erratically high on October 28. You can read which stocks Cramer discussed on Friday in our article, Jim Cramer’s Latest Game Plan: 20 Stocks to Watch.
He went on to highlight that:
“First you need to understand that no one knows these earnings numbers ahead of time except the CEO, the CFO, and a very small group of very important people at each company, and they are tight-lipped.”
Cramer criticized analysts for their attempts to predict earnings, stating, “We’ve seen how wrong they can be over and over again.” According to Cramer, when a stock spikes before earnings, it does not indicate insider knowledge but rather excessive enthusiasm. He further cautioned that these price increases are occurring without any solid basis, making it perilous for investors. He said, “In other words, these stocks are going up on nothing and that I think makes it very dangerous.”
Cramer reiterated his advice and said:
“I am indeed trying to discourage you from trading these stocks ahead of the quarters. It’s just a roulette game based on nothing. Often the game feels rigged, you just don’t know which way it’s rigged because companies really and truly do not let this stuff drip out.”
Concluding his remarks, he said:
“Bottom line, no one on Wall Street knows what any of the quarters will look like, except for the principals. So don’t bother to follow the money that you see trading right now in anticipation. You know why? It’s a fool’s errand.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 25 and 28. 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).
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Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 84
Cramer likes Lam Research Corporation (NASDAQ:LRCX) and commented that the stock should not have suffered.
“And the answer about Lam Research is, I like it very much here. LRCX should not have gone down today. I think it’s doing extraordinarily well. And it’s not just linked entirely with what ASML is. They already told you how much Chinese exposure they have and they’ve had to cut it back. So the answer is I would buy it.”
Lam Research (NASDAQ:LRCX) operates in the semiconductor industry, focusing on the design, manufacturing, marketing, refurbishment, and servicing of equipment used in the production of integrated circuits. On October 23, it revealed its fiscal first quarter results. Following the announcement, Lam’s stock experienced an upward movement, providing a sense of relief to investors after ASML reported disappointing results.
For the quarter, the company reported adjusted earnings of 86 cents per share on revenue totaling $4.17 billion. These figures exceeded the expectations set by analysts surveyed by FactSet, who had expected earnings of 81 cents per share and revenue of $4.01 billion. During the earnings call, Chief Financial Officer Douglas Bettinger noted that 37% of the company’s revenue for the quarter came from China, a slight decrease from 39% in the previous quarter.
Bettinger mentioned that the figure was more favorable than what the company had initially projected. Lam Research (NASDAQ:LRCX) management indicated expectations for a decline in domestic China Wafer Fabrication Equipment in the second half of the fiscal year when compared to the first half. Additionally, the company’s revenue derived from China is expected to normalize to around 30% in the upcoming December quarter.
Overall LRCX ranks 3rd on Jim Cramer’s stock watchlist. While we acknowledge the potential of LRCX 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 LRCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
