We recently compiled a list of the Jim Cramer’s Game Plan: 12 Stocks in Focus This Week. In this article, we are going to take a look at where The Goldman Sachs Group, Inc. (NYSE:GS) stands against the other stocks featured in Jim Cramer’s game plan.
Jim Cramer, the host of Mad Money, recently discussed some of the week’s important market events, focusing on earnings reports from different companies, including major banks and new data from the Labor Department.
Cramer expressed hope that the wildfire situation would bring some positive news. He acknowledged the challenges natural disasters bring, but pointed out that government and insurance companies are working to stabilize the situation. While Cramer made it clear that he doesn’t support exploiting tragedy for profit, he also noted that some retailers tend to benefit during such times as people begin rebuilding.
He mentioned that while some of these stocks have already seen gains, there may still be room for growth, especially as insurance payouts and government funds flow toward reconstruction efforts.
“How about the other side of the trade? Here I’m talking about earnings. Can great earnings triumph over a sour bond market? We’re going to find out for certain because this is a week we associate with bank earnings and there’s a lot of misconceptions about the banks. We know that when they make the wrong bets on the bond market, like two years ago, their stocks can take some real nasty hits. But when their bond portfolios are good, like they are today, they can withstand or even profit from higher rates so let’s not write these stocks off.”
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Regarding the JPMorgan Healthcare Conference, Cramer noted that this is a major event where nearly every drug and healthcare company presents updates. He expects some exciting developments, despite current economic conditions. However, he cautioned that drug stocks are still highly sensitive to interest rates, which, in many cases, are more influential than even a company’s pipeline or earnings. Cramer discussed the Producer Price Index (PPI) and the Consumer Price Index (CPI), which are scheduled for release on Tuesday.
“It needs to come in cooler if there’s any hope that interest rates could reverse and the Fed can regain some of its lost credibility, stemming from cutting in a hurry when we now know there was no need to do so. I think it’s possible that these numbers are gonna be cooler than the labor report, but not enough to justify our appeal of today’s losses.”
Wednesday’s market action would bring more attention to bank earnings, Cramer explained, noting that banks would likely receive an initial boost from higher interest rates, particularly through products like certificates of deposit, which offer lower rates than what banks can earn by investing in the bond market. While this provides a short-term benefit, it could make these stocks worth holding in the interim.
“Bottom line: If you’re a bull or at least trying to make sense of this market, well, you know a market that goes down on seemingly good news, all I can say is that the stock market that gets surprised may seem like it’s reacting inappropriately until you see its master, the bond market, explain everything by the direction of interest rates. For now, that’s the key determinant of the entire stock market, even as there are pockets of positivity that can escape the bond market’s tyranny.”
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 10. 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).
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The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 72
Cramer expressed optimism about banks like The Goldman Sachs Group, Inc. (NYSE:GS) reporting their earnings this week.
“On Wednesday, we’re gonna hear from JPMorgan, Goldman Sachs, Wells Fargo, and Citigroup. I think they’re all gonna be pretty darn good. Plus, given the environment has improved for mergers and acquisitions, as we’ve seen already this year, we gotta have some excellent forecast. I like these stocks and they’re well off their highs with very low price-to-earnings multiples. Could it be a real opportunity? I think so. We’ve been buying a bunch of them for the Charitable Trust because a robust economy often produces the best results for these companies. Regardless of the bond market or the Fed. We have less, fewer credit problems.”
Goldman Sachs (NYSE:GS) is a prominent global financial services firm, recognized for its expertise in investment banking, wealth management, and other financial services. As of the end of the third quarter of 2024, the company reported deposits totaling $445 billion. In the first half of 2024, it achieved a margin of 23%. For the full year, the company expects its fundraising efforts to surpass $60 billion, driven by ongoing demand across various asset classes.
The company is also on track to meet its $10 billion target for management and other fees in 2024. In the third quarter of 2024, its Global Banking and Markets division remained a top advisor in mergers and acquisitions (M&A) and a key player in global risk management. As demand for committed acquisition financing has increased, the company anticipates this trend to continue with the rising volume of M&A activity.
According to Stephan Feldgoise and Mark Sorrell, co-heads of Goldman Sachs’ (NYSE:GS) Global Mergers and Acquisitions, several factors have contributed to a surge in M&A activity in 2024. Despite market volatility stemming from global elections, M&A activity rose by approximately 10% and is expected to see similar growth in 2025. Private equity firms are deploying capital at rates closer to historical averages, and Goldman Sachs remains confident about the long-term prospects for M&A, regardless of geopolitical or regulatory challenges.
Overall GS ranks 3rd on our list of the stocks featured in Jim Cramer’s game plan. While we acknowledge the potential of GS 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 GS 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 is originally published at Insider Monkey.