Recently, Mad Money’s host, Jim Cramer addressed what he called a “ridiculous plethora of sell-side downgrades,” noting that the Dow Jones Industrial Average fell by 0.94%, the S&P 500 decreased by 0.96%, and the Nasdaq Composite dropped by 1.18% on Monday. While he acknowledged the session’s poor performance, he cautioned that paying too much attention to downgrades can be detrimental for long-term investors.
Cramer urged investors not to get overly influenced by the negative sentiment on Wall Street and emphasized the importance of staying committed to strong companies, even when their stock prices experience volatility. He recounted the history of the bull market, stating:
“When I look at the history of this incredible bull market, and it has been an incredible bull market, it’s littered with buy-to-hold, hold-to-sell, buy-to-hold, hold-to-sell. These downgrades scare you out of amazing stocks at levels that may temporarily be too high, but will recover later. If you listen to the downgrades, though, you’ll never recover with it.”
In discussing the challenges investors face, Cramer pointed out that many get rattled by analyst downgrades and might sell their shares in solid companies, which can make it difficult to buy back in later.
“In the last decade, the toughest thing to do is to hold on to good stocks. But analysts and commentators love to take aim at big long-term winners. Their jeremiads have scared so many people out of some amazing gains.”
He observed that complacency can be prevalent on Wall Street, with bullish investors often overlooking risks while bearish ones miss out on potential opportunities. For those considering action based on a downgrade, Cramer advised waiting for a bounce to sell, but he noted that timing such moves is “incredibly hard,” even for seasoned traders.
Cramer emphasized that when analysts downgrade stocks that have already taken a hit and overlook positive aspects, it can create a challenging environment. However, he believes it is still possible to profit. Here’s what he said:
“I need you to understand that when analysts downgrade after stocks have already been hammered, when really good investors ignore the positives, then, it may be a grim time. But not so grim that we can’t make money by focusing on the fundamentals of the companies. And not just the economy, the Fed, interest rates and oil.”
Jim Cramer on Netflix and Other Stocks
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during his episodes of Mad Money on October 7 and October 8. 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).
15. LendingTree, Inc. (NASDAQ:TREE)
Number of Hedge Fund Holders: 17
LendingTree, Inc. (NASDAQ:TREE) runs an online platform in the United States that offers a range of financial services. Through its operations, the company provides consumers with access to mortgages, home equity loans, various credit products like credit cards and personal loans, as well as insurance options. When a viewer asked if they should continue to hold the stock, Cramer said:
“Yeah, you can continue to own it. Doug Lebda really kind of done a really good job there… Kind of an untold story and it’s a very good one. I’ve known him [Lebda] for many, many years and he’s doing quite well. I think you’re in good shape with that one in the future earnings. This current has not been that good, but I think going forward is going to be better.”
In the second quarter, LendingTree (NASDAQ:TREE) reported a solid performance with consolidated revenue reaching $210.1 million. The growth was significantly driven by the Insurance Segment, which experienced a 15% increase in revenue compared to the same period last year. The company’s GAAP net income for the quarter was $7.8 million, or earnings of $0.58 per diluted share.
On July 30, Oppenheimer raised the price target on LendingTree (NASDAQ:TREE) to $65 from $55 and kept an Outperform rating. The firm pointed to an accelerating trend within the insurance market, anticipating that consumer revenue will benefit from site conversion initiatives and lower interest rates in the latter half of the year. Oppenheimer also expects continued growth in the Insurance Segment through 2025, driven by strong demand in housing and recent approvals for premium rate increases in larger states like California.
14. SoFi Technologies, Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 29
SoFi Technologies, Inc. (NASDAQ:SOFI) has brought forward innovation in the financial services sector, providing a diverse range of offerings, including lending, banking, insurance, and investment solutions, all accessible through a single online platform. Cramer likes the stock and does not agree with the bears and the short sellers. He particularly likes the company’s CEO and made a point about him telling a good story.
“There are people who genuinely hate this company and it has a very big short position. But how many times have I asked Anthony Noto to come on and defend it? And every time he does and every time he tells a cogent story. So I am not backing away from Noto. I like the stock.
Hey listen, you can say, you know what Cramer, you’re just soft on Noto. Go check my record. Anthony and I would be the first to agree that that has not always been the case, right? Listen to me, this beautiful bull market is littered with analyst downgrades. So a lot of times if you listen to them, the stocks will just end up recovering but without you. Yes, they could go down but then they go back up. My advice is don’t let them go.”
SoFi Technologies’ (NASDAQ:SOFI) lending segment remains its largest area. However, it has successfully broadened its offerings beyond loans. Its white-label financial services infrastructure, known as Galileo, is noteworthy. The company’s offerings have attracted millions of members at a remarkable pace. The second quarter reported a 41% year-over-year increase in membership, bringing the total to nearly 8.8 million, with product offerings rising by 36%.
Despite facing challenges from a higher interest rate environment, SoFi Technologies’ (NASDAQ:SOFI) performance remains noteworthy. In the second quarter, the company achieved a revenue of $599 million, a 20% increase compared to the previous year. The growth, while slower than in previous periods, still highlights the company’s resilience and adaptability in a competitive financial industry.