On Monday, Jim Cramer, host of Mad Money, discussed the ongoing success of major technology stocks, particularly the Magnificent Seven. He noted that these companies are proving their resilience in the market, no matter the circumstances, likening their performance to having a unique “Poltergeist 2 magic.”
Cramer pointed out that this latest rally for the Magnificent Seven differs from previous ones, as it is not merely a zero-sum game where gains for one group come at the expense of another. Instead, other sectors are also thriving, likely due to the influx of capital into the market.
“Unlike previous Mag 7 rallies, this one’s definitely not a zero-sum equation where the rest of the market does nothing. Other groups can roar, too, in this market, perhaps because there’s just a lot of money going around.”
He noted that the Federal Reserve’s rate cuts mean that cash is losing value, creating an environment ripe for growth. He mentioned that the staying power of the Magnificent Seven is truly unbelievable.
“We know these stocks will once again be hit by endless worries, giving you more opportunities to buy and more weakness before they snap right back and start climbing all over again.”
Cramer highlighted that this week marks the beginning of a crucial four-week earnings season, emphasizing that these quarterly reports hold significant weight for investors and the broader stock market. He acknowledged the current climate of anxiety, especially following the market’s impressive rally. He added:
“Why stress about how quickly the Fed will cut rates, Oh? God, I’m sick of that. What matters is they’re giving vast swaths of the economy a big boost and I doubt they’ll stop anytime soon.”
Cramer also observed that investors often gravitate toward underdogs in the market, suggesting that banks could be the next promising sector. In addition to banks, Cramer also mentioned the potential in pharmaceutical stocks, suggesting that investors might want to consider major players in that sector as well.
Jim Cramer on the Magnificent Seven Stocks Plus Netflix
Our Methodology
For this article, we compiled a list of stocks that were discussed by Cramer during his episode of Mad Money on October 14. 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).
8. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
While Cramer mentioned that Tesla, Inc.’s (NASDAQ:TSLA) performance has fallen short recently, he said he would not bet against Elon Musk.
“Finally, there’s Tesla… I know, Tesla… disappointing self-driving car event last week while the robotaxi shindig was definitely short on facts. At the end of the day, do you really wanna bet against Elon Musk? I don’t. I think the odds are good he’ll figure this out. So even if you don’t want to own it, you’re taking your life in your hands if you try to short it.”
Despite Tesla’s (NASDAQ:TSLA) strong presence, it is currently navigating a challenging landscape in the electric vehicle market, where demand appears to be softening. Many consumers are opting for more affordable gas-powered vehicles in response to difficult economic conditions, including elevated interest rates. Additionally, the company faces increasing competition from both established automakers and emerging low-cost electric vehicle manufacturers, particularly from China.
In the third quarter, Tesla (NASDAQ:TSLA) reported nearly 463,000 vehicle deliveries, a 6.4% increase compared to the same period last year. However, the company may yet struggle to surpass its total electric vehicle sales for 2024. CEO Elon Musk has previously indicated expectations of achieving an average annual growth rate of about 50% for several more years, though delivery figures do not seem to reflect an alignment with the goal. In a bid to stimulate sales growth, the company plans to introduce a low-cost electric vehicle model in the upcoming year, with a target price of around $25,000. It could attract a wider customer base and reinvigorate demand for its offerings.
Recently, during the “We, Robot” event, Tesla (NASDAQ:TSLA) unveiled the eagerly awaited Cybercab robotaxi, which will operate on its full self-driving (FSD) software. It is considering making these Cybercabs available to the public at an estimated price of around $30,000 each, enabling individuals to purchase fleets and potentially start their own ride-hailing services. It is worth noting that the presentation on the Cybercab was somewhat light on specifics. Lastly, the company has previously announced plans to invest $10 billion in data center infrastructure this year to support the training of its FSD models.
7. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Cramer has mentioned Netflix, Inc. (NASDAQ:NFLX) frequently over the past few days. He recently expressed a positive outlook for the company, noting that since he expressed optimism about the stock in April, it has surged over 26%, significantly outpacing the performance of the S&P 500. In the latest episode of Mad Money, Cramer said:
“I know Netflix doesn’t belong in the Mag Seven, but it was part of the original FAANG that I traced out… When Netflix reports on Thursday, you have to keep in mind that they haven’t even begun to monetize their new ad tier yet. I think [it can] de-risk this quarter because management can tell a good story about the future, which is what matters.”
Cramer has previously discussed the company’s advertising business gaining momentum, along with additional revenue streams from paid sharing initiatives. Netflix (NASDAQ:NFLX) continues to evolve as a significant player in the entertainment industry and has shown impressive advancements in its advertising business. In the second quarter, the company reported a 17% increase in revenue compared to the same period last year, accompanied by a 5% rise in profit margins.
The growth points to a successful strategy that has led to an uptick in streaming subscriptions, with paid memberships now reaching 278 million, an increase of 17% from the previous year. The company’s advertising tier is also making substantial strides, with membership in this category growing by 34% from the first quarter. As part of its ongoing efforts to advance this segment, the company is developing an in-house advertising technology platform. Management said that it is set to undergo testing in Canada in 2024, with a broader rollout planned for 2025.
Netflix (NASDAQ:NFLX) forecasts a 14% revenue growth year-over-year for the third quarter of 2024. For the entire year, based on foreign exchange rates at the end of the second quarter, the company has adjusted its revenue growth expectations to a range of 14% to 15%, slightly up from the earlier forecast of 13% to 15%.
