As earnings season kicks off, Mad Money’s host, Jim Cramer reminds investors that bad news can often be factored into a stock’s price ahead of an earnings report. He cited the recent example of PepsiCo, which saw its shares decline before rebounding despite reporting a revenue miss.
Cramer highlighted that when a stock has already faced significant sell-offs leading into a quarter, it is challenging for it to drop further unless the results are exceptionally poor. “This is something you need to keep in mind as we head into earnings season,” he advised, emphasizing the market dynamics at play.
Cramer also expressed his disagreement with the Department of Justice’s exploration of a potential breakup of Google. He argued that such companies play a vital role for consumers, businesses, and the U.S. economy. Acknowledging the power of major tech firms, Cramer pointed out that their substantial customer bases and immense financial resources provide them with advantages that are essential for success.
He went on to say that these companies have become the envy of nations, especially considering that many countries invest heavily in nurturing their own national champions. In contrast, Cramer questioned the approach taken in the U.S., emphasizing the need for capital to foster growth.
“The best companies we have, the best companies in the world, we’re dealing with companies that have done amazing things for the American people, and yet they’re vilified by the Justice Department’s antitrust division, [and] of course, the Federal Trade Commission. Think about it.”
He warned that if the courts side with the DOJ and the FTC, consumers might not benefit as expected. Cramer explained that undermining these companies could open the door for foreign entities, particularly those backed by government subsidies, to fill any gaps left in the market.
“Believe me, if the courts agree with the Justice [Department] and the FTC, let me tell you something. Here’s what’s going to happen. Your prices ain’t coming down, they’re going up. We hurt these companies too much and we don’t have to worry, the PRC will come in with something subsidized by their government that will happily step in the void.”
He challenged the perception that wealth generated by these tech giants is solely hoarded by executives, asserting that investors also stand to gain. He stated:
“You could own the stocks right alongside them. In fact, as I tell CNBC Investing Club members daily, you should…I don’t know what will happen when the Biden administration runs its course, but I gotta tell you, I certainly won’t miss the ruthless prosecution and hectoring of Big Tech…The American government [is] so upset at the power of these companies that it’s insisting the tech titans should simply be less good. To which I say, good for who? Good for what? Certainly not us…Bottom line, I find this endless string of government investigations wrong-headed, pointless, and frankly, even anti-American.”
Cramer’s Latest 10 Lightning Round Stocks
Our Methodology
For this article, we compiled a list of 10 stocks that were mentioned by Jim Cramer during the lightning round of his episode of Mad Money on October 9. 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).
10. Equinor ASA (NYSE:EQNR)
Number of Hedge Fund Holders: 14
Talking about Equinor ASA (NYSE:EQNR) during his lightning round, Cramer said:
“It’s okay. I’m not encouraging buying in that sector. I just think that sector just does not offer as much upside as it used to many, many years ago.”
It is an energy company engaged in a wide range of activities, including the exploration, production, transportation, refining, and marketing of petroleum and other energy sources, both in Norway and internationally. Additionally, it is involved in the development of low-carbon solutions and carbon capture and storage projects.
Recently, Equinor (NYSE:EQNR) announced that it would not proceed with plans to construct a hydrogen pipeline connecting Norway to Germany, a project in collaboration with partner RWE AG. The decision came amid challenges related to securing customers, ensuring supply, and navigating an adequate regulatory framework, as reported by Bloomberg in September. The two companies had initially outlined their intentions to collaborate on hydrogen initiatives in January of the previous year.
Additionally, Equinor (NYSE:EQNR) indicated plans to downsize its renewables division, initiating discussions with unions about the workforce in this area, as reported by Bloomberg in August. An internal memo revealed that the renewables sector is currently experiencing a downturn, and the focus for the next few years will be on positioning the company to compete effectively when the market improves. Pal Eitrheim, the head of the renewables unit, mentioned the necessity for adjustments in light of recent project cancellations due to unfavorable economic conditions.
9. McCormick & Company, Incorporated (NYSE:MKC)
Number of Hedge Fund Holders: 29
A caller asked Cramer about McCormick & Company, Incorporated (NYSE:MKC) during the lightning round, and here’s what he said:
“I think buying it right here is a very good idea… I thought that McCormick did a good job when the company was on the show… I know it’s a staple, and the staples are out of favor when the Fed cuts, but I think that they’re doing a very good job. Brendan Foley really explained the situation well.”
The company is a well-known manufacturer and distributor of spices, seasoning mixes, condiments, and a variety of flavorful products aimed at the food industry. On October 1, Cramer discussed the company and commented:
“This morning we got results from McCormick, the leading maker of spices and seasonings. Once again, the number’s pretty solid. McCormick has delivered a series of good quarters. The stock is now up 23% year to date, outperforming the S&P 500.
Today we got more of the same, McCormick delivered better-than-expected sales, [and] positive volume growth for the first time in nearly three years. We gotta talk about that. Throw in some strong margins and you get a 16-cent earnings beat off a 67-cent basis. On top of that, management raised their full-year sales and earnings forecast.”
In its third quarter, McCormick & Company, Incorporated (NYSE:MKC) reported earnings per share of $0.83, an increase from $0.63 in the same period the previous year. Sales during this quarter were stable compared to the prior year, with only minimal effects from currency fluctuations. It was partly influenced by the company’s decision to divest a small canning business, while the Consumer segment saw a 1% growth in volume.
Additionally, the company achieved an expansion of 170 basis points in gross profit margin compared to the third quarter of last year. The improvement stemmed from a favorable product mix and cost savings derived from the Comprehensive Continuous Improvement (CCI) program.
McCormick & Company, Incorporated (NYSE:MKC) has outlined expectations for 2024, projecting earnings per share to be between $2.81 and $2.86, compared to $2.52 in 2023. The company forecasts that sales will remain relatively unchanged, ranging from a decline of 1% to a gain of 1% compared to the previous year, again with minimal currency impact. It expects to benefit from the pricing actions taken in the prior year and is optimistic about improving volume trends as it moves forward.