We recently compiled a list of the A Game Changer: Jim Cramer’s Latest Top 10 Stock Picks. In this article, we are going to take a look at where PulteGroup Inc. (NYSE:PHM) stands against Jim Cramer’s other stock picks.
Jim Cramer: Billions to Flood the Market as Double Rate Cut Sparks Stock Surge!
In a recent episode of Mad Money, Jim Cramer explains that a double rate cut, or a 50 basis point reduction, is likely to attract tens of billions of dollars into the stock market from investors who have been sitting on the sidelines. Many people have been holding onto cash in money funds, eager to invest, especially as rates start to decline. While some are tied up in CDs or treasuries, those inaccessible money funds see the opportunity to move their cash into high-yield dividend stocks.
Cramer warns that they need to act quickly, as these stocks will soon rise in price and lose their high-yield appeal. He also criticizes commentators on television who downplay the Fed’s impact by focusing on the national debt. He argues that these voices are not interested in helping everyday investors; instead, they cater to the wealthy. Cramer reminds listeners that their audience is diverse, and it’s essential to focus on making informed investment decisions.
“When you get a double rate cut, meaning a 50 basis point monster, well, that’s going to bring tens of billions of dollars into the stock market from the sidelines. The sidelines have been so lucrative for so long that people in money funds have been coveting their dollars. Sure, there are plenty of folks sitting in two- to three-year CDs or treasuries who can’t easily cash out, but if you’re in an easily accessible money fund, you can see rates are going lower now, right? That’s all the more incentive to put your cash into, say, dividend stocks with high yields. You’ve got to do it fast because pretty soon, the high yielders will rally to the point where they’re just mid-yielders.
No matter how smart they sound, the people who come on television to argue that the Fed’s actions don’t matter because the national debt is too big are being unhelpful. These people are not concerned with helping you make money; you’re not important to them. They’re speaking to the billionaire class. Yes, they crowded you out a long time ago. Remember, we do have all sorts of audiences.”
Additionally, Jim Cramer points out that many Wall Street analysts like to go against popular opinion, which leads them to downplay the importance of a half-point rate cut. He believes this perspective ignores common sense. Cramer acknowledges that while aging has its downsides, like not being able to move around as easily at events, he feels he has gained wisdom. He understands the situation better than those who argue that the rate cut indicates panic, simply by being present and observing the market.
“Everybody on Wall Street loves to be a contrarian, which is why so many commentators keep trying to minimize the impact of a half-point rate cut. Not me! No matter what, common sense dictates that there are always people who think they know better than common sense, and they don’t. There are so few advantages to age, I have to tell you.”
Can the 50 Basis Point Cut Spark Stock Gains and Revive Housing?
Jim Cramer points out that during rate cuts, there are many promising winners to consider, while the losers are easy to spot and should be avoided. He emphasizes that when the Wall Street Journal reported the chance of a 50 basis point cut, it opened up more opportunities for stocks to benefit. A smaller 25 basis point cut could have aided homebuilders if they had built more homes, but they’ve been reluctant due to high rates. However, a 50 basis point cut will lower mortgage rates, making homes more affordable and likely giving a boost to the housing market.
“The winners in an easing cycle are varied and exciting, while the losers are obvious and must be avoided. From the moment the Journal reported that there could be a 50 basis point cut, the swatch of what can go higher expanded dogmatically. A 25-point cut would have been truly beneficial for homebuilders if they would just start building a lot more homes, that’s something they’ve been reluctant to do because rates are still too high. But a 50 basis point cut means lower mortgages for certain and, therefore, more affordable homes.”
Our Methodology:
In this article, we delve into the latest episode of Jim Cramer’s Morning Thoughts, where he analyzed various stocks. We rank these companies based on their popularity among hedge funds, starting with the least owned and moving up to the most favored.
At Insider Monkey we are obsessed with 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).
Construction workers laying bricks during the residential development of multiple lots.
PulteGroup Inc. (NYSE:PHM)
Number of Hedge Fund Investors: 35
Jim Cramer reports that Bank of America has increased its price targets for homebuilders, including PulteGroup Inc. (NYSE:PHM), highlighting the advantages of lower borrowing costs. BofA has also maintained a buy rating on PulteGroup Inc. (NYSE:PHM).
PulteGroup, Inc. (NYSE:PHM), one of the largest homebuilders in the U.S., has a promising outlook driven by several key factors. In its Q2 2024 earnings report, PulteGroup, Inc. (NYSE:PHM) announced total revenues of $3.4 billion, a 10% increase from the previous year, and net income rose to $634 million, up from $580 million in Q2 2023. PulteGroup, Inc. (NYSE:PHM) sold 6,182 homes in this quarter, reflecting strong demand despite market ups and downs, and it has a backlog valued at $7.1 billion, indicating robust future revenue potential.
The demand for new homes is particularly strong in entry-level and active adult markets, which PulteGroup, Inc. (NYSE:PHM) is strategically focusing on, as these groups tend to be less affected by economic shifts. PulteGroup, Inc. (NYSE:PHM) has also shown effective cost management, allowing it to maintain good profit margins even with rising material costs.
By following a careful land acquisition strategy and choosing desirable locations for its homes, PulteGroup, Inc. (NYSE:PHM) is well-prepared to take advantage of the current recovery in the housing market, driven by increasing household formations and buyer interest. Additionally, PulteGroup, Inc. (NYSE:PHM)’s expansion into new areas and diversification of its offerings further strengthen its revenue potential, solidifying its market position.
Overall PHM ranks 8th on our list of Jim Cramer’s latest top 10 stock picks. While we acknowledge the potential of PHM as an investment, 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 PHM 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.