We recently compiled a list of the Jim Cramer Discussed These 11 Stocks Recently. In this article, we are going to take a look at where QuantumScape Corporation (NYSE:QS) stands against the other stocks.
Jim Cramer, the host of Mad Money, cautioned viewers on Wednesday about the risks of blindly following the crowd in the stock market. He emphasized that it is essential to avoid expecting the same outcome as everyone else, as there is a significant chance things will not play out as expected. This, he explained, is because many expectations are often already “priced in” to the market.
“… And that’s why you need to be extra wary of the IPO cycle. Let’s go over this. We’ve seen the pattern over and over again. We get this deluge of new deals, at first, many of them explode higher, but at the same time they’re flooding the market with new stock supply and that supply ultimately drags us down. I’ve said it a million times, the stock market is like any other market. It’s all about supply and demand.”
READ ALSO Jim Cramer Shed Light on These 10 Stocks and 10 Stocks on Jim Cramer’s Radar
When supply increases too rapidly, prices are likely to fall. He stressed that the enthusiasm surrounding IPOs, particularly when they make early investors substantial profits, creates an environment of palpable excitement. Cramer noted that when interest in these IPOs wanes, that initial exuberance quickly turns to frustration, which can cause broader market declines, not just in IPOs but across the board.
Such a cycle, Cramer noted, is nothing new. He pointed to 2020 and 2021 as prime examples of how a flood of IPOs and SPAC mergers, fueled by stimulus checks, led many people to invest in trendy stocks. He added:
“2020, we also had a ton of electric vehicle and charging station-related IPOs and SPAC mergers. At first, these stocks were unstoppable, although most of that was because this was a period of high-risk speculation where people were willing to give anything with the right buzzwords.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 12. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 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 line of electric vehicles parked in front of a research & development building in San Jose, California.
QuantumScape Corporation (NYSE:QS)
Number of Hedge Fund Holders: 22
Cramer did a deep-dive into QuantumScape Corporation (NYSE:QS) and how the market reacted to it after its IPO in 2020.
“It’s a company called QuantumScape. QuantumScape, which in retrospect was basically a science experiment looking to develop better battery technology for electric vehicles. Anyone can develop better, more efficient batteries with the ability to charge very quickly and and, and you can make a killing even in a world where electric cars have lost some of their luster.
But QuantumScape was a long way from having anything they could actually commercialize and they could sell. Even four years later, these guys still didn’t have any meaningful revenue. Back in 2020 and early 2021, Wall Street was still giving the benefit of the doubt to anything connected to electric vehicles. QuantumScape came public via a SPAC deal and you have to be, remember, you have to be really skeptical of those. And when that merger was announced, the SPAC it was merging with, saw its stock more than double in just two trading sessions putting it in the 20s.”
Cramer then highlighted QuantumScape’s (NYSE:QS) rapid rise to $132 in December 2020, driven by hype around its electric vehicle technology, before the stock was targeted by short sellers. Cramer mentioned that as Wall Street lost interest in unprofitable, speculative companies, the stock plummeted by late 2022. He noted that any recent rebounds were likely due to short squeezes rather than any real improvement in the company’s fundamentals.
QuantumScape (NYSE:QS) is a research and development firm dedicated to creating and commercializing solid-state lithium-metal batteries for electric vehicles and other applications.
Overall QS ranks 3rd on our list of the stocks Jim Cramer discussed recently. While we acknowledge the potential of QS 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 QS 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 was originally published at Insider Monkey.