We recently published a list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. In this article, we are going to take a look at where United States Steel Corporation (NYSE:X) stands against other stocks that Jim Cramer thinks deserve attention.
In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“Recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
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A conveyor belt winding its way through a steel production facility.
United States Steel Corporation (NYSE:X)
Number of Hedge Fund Investors: 58
Jim Cramer noted that JPMorgan has upgraded United States Steel Corporation (NYSE:X) to a buy-equivalent rating, highlighting that the risk and reward for steel stocks are becoming more favorable after a period of weaker fundamentals. According to analysts, the recent sharp decline in United States Steel Corporation (NYSE:X)’s stock due to uncertainty about its potential takeover by Japan’s Nippon Steel has created a compelling buying opportunity.
“JPMorgan upgraded U.S. Steel to buy-equivalent ratings, arguing the risk/reward for steel stocks is improving after a period of weakening fundamentals. Analysts said that U.S. Steel’s steep pullback on uncertainty over its takeover by Japan’s Nippon Steel has created an attractive entry point.”
A positive outlook on United States Steel Corporation (NYSE:X) is supported by its strategic focus on efficiency and growth. United States Steel Corporation (NYSE:X) is significantly expanding its Electric Arc Furnace (EAF) capabilities, with the Big River 2 (BR2) mini-mill set to nearly double its production capacity. This shift to more efficient and eco-friendly steelmaking is expected to increase EBITDA from $2.2 billion in 2023 to $2.8 billion by 2025.
Investments in downstream products like galvanizing and electrical steel are also likely to boost future revenue. Despite some challenges, United States Steel Corporation (NYSE:X) reported $4.1 billion in net sales and $183 million in net earnings for Q2 2024 and is expected to see free cash flow rise to $1.6 billion by 2025. These factors, along with ongoing capital investments, support a positive long-term outlook for United States Steel Corporation (NYSE:X)’s profitability and stock performance.
Overall, X ranks 7th on our list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. While we acknowledge the potential of X, 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 the ones on our list 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.