We recently compiled a list titled Jim Cramer’s Top 10 Stocks to Track for Potential Growth. In this article, we will look at where Sofi Technologies Inc. (NASDAQ:SOFI) ranks among Jim Cramer’s top stocks to track for potential growth.
In a recent episode of Mad Money, Jim Cramer points out the surprising strength in the market, noting that many companies are performing better than Wall Street recognizes. He argues that people should stop doubting these companies every time there’s a negative data point. Cramer highlights the impressive management and execution by CEOs, which often goes unnoticed.
“Suddenly, all is forgiven, or if not all, then at least most. I’m talking about the incredible resilience in this market, buoyed by a recognition that many companies are simply better than Wall Street gives them credit for. We need to stop turning against them every time there’s a seemingly bad data point. Every day I come to work, I’m dazzled by the resourcefulness of executives who do their best to create value for you, the shareholder. Lots of stocks went up on days like today when the Dow advanced 335 points, the S&P gained 75%, and the NASDAQ jumped 1.0%, all thanks to good management and excellent execution that often goes unnoticed.”
While Cramer acknowledges that some CEOs deserve skepticism, he emphasizes that many are outstanding and deserve recognition for their hard work. He criticizes the focus on short-term economic indicators and emphasizes that great companies aren’t distracted by minor fluctuations.
“Listen, I’m not a pushover. I can hit CEOs with tough questions when needed, some of them deserve skepticism and scorn. But there are also plenty of brilliant, hardworking CEOs with incredible teams, and you ignore their hustle at your own peril. This often gets lost in the shuffle when we’re focused on the parlor game of guessing the Fed’s next move—a quarter point, half a point, quarter, half. You know what I say? Let’s get serious. Terrific companies don’t get caught up in that quarter-half shuffle.”
Cramer explains how Kroger CEO Rodney McMullen has led the supermarket chain to success despite challenges, including resistance to its acquisition of Albertsons and a tough economic environment. McMullen has managed to keep food costs down and deliver strong results through effective strategies like a superior loyalty program and regional store improvements. Despite high food prices, the company’s stock rose more than 7% following a positive earnings report, showcasing the company’s successful turnaround.
“CEO Rodney McMullen has managed to keep food costs down and deliver fantastic numbers, all while maintaining an expensive, unionized labor force in a very uncertain commodity environment. How? The company confounded critics by developing a superior loyalty program, regionalizing their stores, and creating some of the best private-label products out there, second only to Costco. Food is still expensive, but cooking at home is far cheaper than dining out. McMullen tells us that consumers are no longer flush with cash, especially his most budget-conscious clientele. He notes, “Budget-conscious customers are buying more at the beginning of the month to stock up on essentials, and as the month progresses, they become more cautious with their spending.”
Wow, that’s a tough environment. When I heard this, I thought back to the old company, the one that used to miss its numbers whenever the environment got a little tough. Everybody else remembers the old company too, which is why the stock was just sitting there waiting to be picked up, until this quarter’s report, after which it soared more than 7% in response to the fabulous results. Everyone thought the company would drop the ball, as they used to, but McMullen has finally whipped his supermarket into shape.”
Cramer contrasts this with the tech industry, where complex details often lead Wall Street to misunderstand a company’s true potential. He believes that in tech, analysts frequently overlook the expertise and capabilities of CEOs who have a deep understanding of their businesses.
“We all need to eat, so it’s not hard to understand the grocery business. But it’s quite different when it comes to tech, where analysts constantly doubt the resolve and expertise of CEOs who simply know more about their businesses than the critics. In tech, the complexity often leads Wall Street to conclusions that have little to do with reality.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he discussed several stocks. We selected and analyzed ten companies from that episode and ranked them by the level of hedge fund ownership, from the least 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 professional banker shaking hands with an entrepreneur in a boardroom setting.
Sofi Technologies Inc. (NASDAQ:SOFI)
Number of Hedge Fund Investors: 29
Jim Cramer sees a strong opportunity in buying SoFi Technologies Inc. (NASDAQ:SOFI) ahead of potential interest rate cuts. Despite the stock being down 25% this year, Cramer views SoFi Technologies Inc. (NASDAQ:SOFI) as well-managed under CEO Anthony Noto, who has appeared on Cramer’s show multiple times. Cramer believes that SoFi Technologies Inc. (NASDAQ:SOFI)’s current price drop presents a chance for investors to get in before rates begin to decrease. He also emphasizes that SoFi Technologies Inc. (NASDAQ:SOFI) is much more than just a company tied to student loans, urging people to recognize it as a fintech company, which is the core of its value.
“I think you buy Sofi Technologies Inc. (NASDAQ:SOFI) ahead of interest rate cuts. It’s down 25% for the year, even though it’s incredibly well-run. To me, this looks like an opportunity. Anthony Noto has come on the show several times, and we did need to see some news about rates. Frankly, I’d also like to see people stop equating this company solely with student loans. It’s a fintech, and that’s what matters.”
Sofi Technologies Inc. (NASDAQ:SOFI) is an appealing investment due to its strong growth in digital lending and neobank services, supported by its full banking license and robust consumer lending business. In Q2 2024, Sofi Technologies Inc. (NASDAQ:SOFI) ‘s revenue grew by 20.2% year-over-year, reaching $598.6 million, driven by high demand for its services.
Analysts have increased their Q3 2024 EPS estimate to $0.04, indicating improved profitability. The full banking license, acquired through Golden Pacific in 2022, gives Sofi Technologies Inc. (NASDAQ:SOFI) a competitive advantage by lowering funding costs and boosting profitability compared to non-bank rivals. Despite its growth, Sofi Technologies Inc. (NASDAQ:SOFI) is undervalued compared to traditional banks, with a favorable price-to-book ratio suggesting significant upside potential.
Additionally, Sofi Technologies Inc. (NASDAQ:SOFI)’s technological capabilities and efficient digital platform position it well in the expanding online financial services market. Overall, Sofi Technologies Inc. (NASDAQ:SOFI)’s revenue growth, banking license benefits, undervaluation, and technological strengths make it a strong candidate for long-term fintech investment.
Patient Capital Opportunity Equity Strategy stated the following regarding SoFi Technologies, Inc. (NASDAQ:SOFI) in its first quarter 2024 investor letter:
“SoFi Technologies, Inc. (NASDAQ:SOFI) fell in the first quarter despite delivering strong 4Q results and 2024 guidance supported by their non-lending businesses. The company continues to gain share in the digital lending and neo-banking space, consistently growing deposits at $2B a quarter. What differentiates the company is their focus on prime and super-prime customers (average FICO 749). Sofi is early in its life cycle, currently being a small player in a very large total addressable market (TAM). With their strong management team, we believe the company will continue to deliver on their guidance of strong growth and expanding margins.”
Overall SOFI ranks 8th on the list of Jim Cramer’s top stocks to track for potential growth. While we acknowledge the potential of SOFI 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 SOFI 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 on Insider Monkey.
