On Thursday, Jim Cramer, host of Mad Money, pointed out that Wall Street often overlooks the importance of strong leadership in a company, and how a new CEO can significantly impact a company’s valuation, even in the face of broader macroeconomic challenges.
“When we value stocks in this environment, we tend to think of how they’ll fare in the world of rising long-term interest rates… how they perform under the new presidential regime… We care about the sector and how it’s behaving but how about the companies? How about the people who run them?”
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Cramer emphasized that too often, the conversation about the individuals running companies gets sidelined. While not every leadership change leads to success, he believes that in certain situations, the right CEO can make all the difference in driving a company’s growth. He urged viewers to consider how a great leader can transform an entire business, suggesting that investors might want to look beyond the usual sector battles and instead focus on companies with fresh, capable leadership.
He added that the ability of a skilled CEO to steer a company in the right direction is an often overlooked but powerful factor. He commented:
“The transcendence of the enterprise, thanks to the leadership of a great CEO, why not celebrate it? Hey, stop denigrating it at least… It may pay to think bigger instead of just being in the tech battleground out here every day.”
Cramer expressed his frustration with the constant debates surrounding the tech sector, stating that he finds the ongoing arguments tiresome. This, he explained, was part of the reason he wanted to shift the conversation and focus on companies led by new executives. “I’m tired of tech just sitting there and people arguing about it all the time. It’s getting boring to me,” he said.
“So here’s the bottom line: Not all publicly traded companies are hostages to forces beyond their control… Sometimes when you bring in a great new CEO… they can turn around the whole business giving the investors spectacular gains even when tech blinds us like mustard gas.”
Our Methodology
For this article, we compiled a list of 6 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 30. 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).
6. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 56
Cramer praised International Business Machines Corporation’s (NYSE:IBM) Arvind Krishna and noted that the stock’s gain is “sustainable”.
“Finally, let’s give IBM’s Krishna his due. When he took over at IBM, he didn’t know what it was at anymore. Who knew what it was anymore and the stock traded around 110? Krishna took it from a hardware outfit with a consulting arm, spun off the legacy business as Kyndryl… and guns this stock to $258 as of today. Now it’s almost 50% software gusher cash flow. Darn think shot up 13% in response to a great quarter. What a winner. Best of all, I think that gain is sustainable.”
International Business Machines Corporation (NYSE:IBM) provides integrated services and solutions, such as hybrid cloud and AI platforms, along with server and storage options for hybrid cloud implementations. Since Krishna took over as the CEO in April 2020, IBM stock has shot up more than 120%.
5. V.F. Corporation (NYSE:VFC)
Number of Hedge Fund Holders: 30
Cramer explained that Bracken Darrell transformed V.F. Corporation (NYSE:VFC) by selling off an important brand.
“Hey, one more. How about this one? Bracken Darrell, he left Logitech for the challenge of turning around the broken clothing company, VF Corp, a little over a year and a half ago. Stock was trading around 19 bucks. Heinous balance sheet. In July of last year, he sold off VF Corp’s hottest brand to EssilorLuxottica for $1.5 billion in cash. It was good, it was a good brand but he had to do it but Darryl, he needed cash. Sure enough, the company reported a great quarter last night and the stock shot up to almost 27 bucks.”
V.F. Corporation (NYSE:VFC) designs, markets, and distributes branded lifestyle apparel, footwear, and accessories for men, women, and children, offering a variety of products across several well-known brands, including The North Face, Timberland, and Smartwool.
Curreen Capital stated the following regarding V.F. Corporation (NYSE:VFC) in its Q4 2024 investor letter:
“Since then, the S&P has gone up strongly, while the ugly ducklings that we bought have largely remained out of favor, for longer than I would have expected. We continue to implement our investment strategy, paying attractive prices for good businesses that are increasing their value. This should be rewarded in the stock market over time, but lately that process has been particularly slow and uneven.
As another example, I would have expected both V.F. Corporation (NYSE:VFC)and Advance Auto to have performed well last year, as the company’s situations are similar, and both made good progress on their turnarounds. In each case, the fundamentals are solid or improving, and I would have thought that they all would rise.
VF Corp manages apparel brands, including Dickies, The North Face, Timberland, and Vans. Under its prior CEO, the company’s poor capital allocation (including overpaying for Supreme and maintaining a too-high dividend after spinning out Kontoor) forced it to pause its model of using excess free cash flow to acquire good brands and manage them well. The company has now cut its dividend (twice) to a reasonable level and brought on a new CEO who has a track record of successfully turning around businesses. I believe that the company has good brands, the skills to manage them well, and a management team that is righting the ship. VF Corp currently trades at an attractive upside-to-downside ratio.”
