We recently compiled a list of the Jim Cramer’s Latest Game Plan: 15 Stocks to Watch. In this article, we are going to take a look at where Super Micro Computer, Inc. (NASDAQ:SMCI) stands against the other stocks in Jim Cramer’s latest game plan.
Jim Cramer, host of Mad Money, recently weighed in on the factors that will shape market movements this week, pointing to the Federal Reserve’s upcoming meeting and a slew of corporate earnings reports as key developments. However, despite the importance of these earnings, Cramer believes that the presidential election will take center stage and dominate the market’s attention.
READ ALSO Jim Cramer is Talking About These 7 Stocks and Jim Cramer on AMD and Other Stocks
While acknowledging the significance of the election, Cramer emphasized that the Federal Reserve’s next decision is perhaps even more crucial for the markets. He noted that the bond market has been moving in an unfavorable direction, with the situation further complicated by a disappointing non-farm payroll report.
Though this report was skewed by hurricanes and labor strikes, it initially sparked a positive reaction in the bond market, pushing rates lower. Cramer had hoped that this would signal a positive shift, but the optimism was short-lived, as bond sellers quickly drove rates back up to their highest levels since early July.
“In my opinion, the Fed needs to cut rates again. In the last couple weeks, we’ve heard from too many businesses that have made it clear that we have a real slowdown on our hands. Economy’s a little shaky.”
Cramer also reflected on the Fed’s decision to reduce rates in September. He acknowledged that the bond market reacted negatively to the rate cuts at the time despite an economy that appeared relatively strong and a healthy labor market. Cramer discussed the possibility that if the Fed were to cut rates again, the market could see another unfavorable response. However, he remained unconcerned about this potential backlash, arguing that a rate cut could help to generate optimism in certain sectors.
“At this point in my view, if the Fed cuts rates next week, psychologically there’s some hope that we could see a pickup, particularly in housing and autos, two industries that seem to be losing strength by the day.”
Cramer highlighted that both presidential candidates appear willing to expand the federal budget. His main concern, however, was whether either candidate would be able to push their proposed agendas through Congress, a process he described as extremely difficult. Cramer noted that, in his opinion, presidential candidate Trump would likely be a bigger proponent of increasing the budget deficit than presidential candidate Harris, particularly due to the tax cuts Trump favors, which tend to result in larger deficits.
Stating his bottom line, Cramer said:
“… At the end of the day, the market’s still going to be hostage to the election, and perhaps more important, to the Fed meeting.”
Our Methodology
For this article, we compiled a list of 15 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 1. 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).
A team of technicians in a server room, testing and managing the newest server solutions.
Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 47
Cramer highlighted Super Micro Computer, Inc.’s (NASDAQ:SMCI) troubles with its auditors and hinted at what it could mean for the company.
“Now, the most intriguing story coming out next week is Super Micro. We know this company is on the firing line after its auditor, Ernst & Young, resigned noisily this week because they couldn’t swear by the numbers and no longer trust management. It’s suboptimal. I have no idea what Super Micro is gonna say. I do know this, ever since Ernst & Young resigned, one of Super Micro’s key competitors, Dell has seen its stock march relentlessly higher. I think that’s pretty ominous for Super Micro.”
Super Micro (NASDAQ:SMCI) is a company that specializes in the development and manufacturing of high-performance server and storage solutions. The company designs and assembles servers and rack systems for its clients in areas such as AI and data storage. One of the company’s distinguishing features is its early adoption of direct liquid cooling (DLC) technology for servers. This is especially important for AI-powered servers, which generate significant heat and consume large amounts of energy.
DLC provides an effective solution to keep these systems cool and operational, making it a preferred choice for enterprises seeking efficient, high-performance systems. The company recently reported a surge in demand for its products, particularly in the AI sector. The company now ships over 100,000 graphics processing units (GPUs) per quarter, which are critical for AI applications.
However, Super Micro (NASDAQ:SMCI) has faced some challenges recently. In September, the Wall Street Journal reported that the company’s accounting practices were under investigation by the Department of Justice (DOJ), which caused a significant drop in the company’s stock value. This negative momentum was further compounded when Ernst & Young, the company’s auditor, resigned.
The accounting firm cited concerns about the company’s governance, transparency, and internal controls as the reasons for its departure. Ernst & Young, which had begun auditing the company earlier in the fiscal year, stated that it was “unwilling to be associated with the financial statements prepared by management.”
In response, the company disagreed with the concerns raised by Ernst & Young and expressed confidence that no restatements would be necessary for its financial reports. The company is currently in the process of finding a new accounting firm to continue its audit.
Overall SMCI ranks 9th on our list of the stocks in Jim Cramer’s latest game plan. While we acknowledge the potential of SMCI 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 SMCI 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.