We recently compiled a list of the Jim Cramer’s 10 Handpicked Stocks to Watch. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against Jim Cramer’s other handpicked stocks.
In a recent episode of Mad Money, Jim Cramer expressed concern that there’s too much negativity in the market despite recent movements. He pointed out that while the Dow gained 38 points on Wednesday, the S&P fell 1.16%, and the NASDAQ dropped 3%, people seemed overly focused on what was going wrong. Although he’s not calling it a market bottom, he suggests it’s worth paying attention to what’s going right.
“On a day when the Dow inched up 38 points, the S&P dipped 1.16%, and the NASDAQ declined 3%, I’m willing to declare that there’s too much doom and gloom out there. Look, I’m not trying to call a bottom, let’s make that crystal clear, but I think it’s worth taking a hard look at what’s actually going right—not just what’s going wrong.”
Cramer emphasized that even though the market has been strong this year, heading into a historically tough election season and the worst month of the year means it’s not the time to declare everything is fine. He noted that according to his trusted S&P oscillator, which measures overbought or oversold conditions, the market isn’t oversold yet, so it’s risky to go all-in.
“Sure, the market’s up a lot this year as we head into a tricky election period and historically the worst month of the year. So, only a fool would ring the all-clear bell. Plus, we aren’t even oversold yet—at least not according to the S&P oscillator I swear by, which gauges whether there’s too much buying or selling compared to normal times. You don’t go all-in when the market is overbought like it is now; that rarely works.”
Cramer also countered the idea that a recession is inevitable due to the Federal Reserve’s struggle to control the economy. He agreed the economy is slowing, which is why consumer packaged goods and utility stocks are rallying while more sensitive sectors are struggling.
“At the risk of sounding too bullish, let me refute some of the biggest and baddest stories out there. First, let’s tackle the popular narrative that the economy is slowing at a faster pace than the Federal Reserve can control, leading to an inevitable recession. That’s why consumer packaged goods stocks and utilities are rallying while economically sensitive stocks have been crushed. I won’t deny that the economy is weakening.”
However, he stressed that a Fed rate cut is meant to counter economic weakness, not strength, and hoping for a rate cut while ignoring the downturn is unrealistic. He added that if the upcoming labor report is weak, recession-proof stocks may surge, but if it’s strong, hopes for a rate cut will fade.
“But let’s be realistic: You can’t hope for a Fed rate cut without acknowledging that there’s going to be some economic fallout. The Fed doesn’t cut rates when business is booming. That’s foolish thinking. Rate cuts are meant to combat economic weakness, not strength. If Friday’s labor report is weak, sure, we might see a huge rally in the so-called “recession-proof” stocks. But if the non-farm payroll number is too strong, forget about any rate cut hopes. You can’t have it both ways.”
Our Methodology
The article summarizes a recent episode of Jim Cramer’s Mad Money, where he discussed and recommended several stocks. This article focuses on ten companies that Cramer highlighted and examines how hedge funds perceive these stocks. The companies are ranked based on their level of hedge fund ownership, starting with the least owned and moving to the most owned.
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).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Looking ahead, the Department of Justice will soon take Alphabet Inc. (NASDAQ:GOOG) to court, accusing the company of misusing its dominance in digital advertising to disadvantage competitors. Cramer acknowledged that Alphabet Inc. (NASDAQ:GOOG) had previously faced criticism for paying to be the default search engine on Apple devices, but he finds the current legal challenge less credible.
“Stocks can’t stabilize until these weak shareholders sell out. History shows that significant market drops like this tend to offer great buying opportunities. On October 25th, 2023, Google dropped $180 billion, and since then, it’s come back with a 25% gain—not bad, but it’s the only stock on this list that failed to beat the S&P, which jumped 32% in that time.
Next week, Justice goes to court to try to stop Google. The Department claims in its brief that Google abuses its monopoly power to disadvantage website publishers and advertisers who dare to use competing ad tech products in search of higher quality or lower cost matches. According to the brief, Google uses “its dominion over digital advertising technology to funnel more transactions to its own ad tech products, where it extracts inflated fees to line its own pockets at the expense of the advertisers and publishers it purportedly serves.
Now, Google was recently found to be engaged in anti-competitive behavior when it paid to become the default search engine for Apple. Yeah, they got nailed for that. I get it—they paid to reach a huge audience. Microsoft could have outbid them to make Bing the default search engine, but they didn’t. However, this new case is more absurd. The Justice Department is going after Google in a business where they’re already losing market share in the open market.”
Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, is positioned for strong long-term growth thanks to its leading role in digital advertising, cloud computing, and artificial intelligence. For Q2 2024, Alphabet Inc. (NASDAQ:GOOG) reported revenue of $74.6 billion, a 7% increase from the previous year, surpassing market expectations. Google Services, which includes advertising and YouTube, generated $63 billion, while Google Cloud revenue grew by 28% year-over-year to $10 billion.
Alphabet Inc. (NASDAQ:GOOG)’s net income also rose to $18.4 billion, with earnings per share reaching $1.44, exceeding analysts’ forecasts. Alphabet Inc. (NASDAQ:GOOG)’s growth is supported by its successful ad sales and efficient cost management. Recent advancements highlight Alphabet Inc. (NASDAQ:GOOG)’s expanding role in AI and cloud computing. In August 2024, Alphabet Inc. (NASDAQ:GOOG) introduced new AI tools integrated into Google Cloud, targeting industries like healthcare and finance.
These innovations are expected to boost Alphabet Inc. (NASDAQ:GOOG)’s cloud business and capitalize on the rising adoption of AI technology. Alphabet Inc. (NASDAQ:GOOG)’s investments in AI, including its Bard AI platform, position it as a leader in the field. With strong financial results, a growing share in cloud services, and leadership in AI, Alphabet Inc. (NASDAQ:GOOG) presents a compelling investment opportunity with significant growth potential.
Overall GOOG ranks 5th on our list of Jim Cramer’s handpicked stocks to buy. While we acknowledge the potential of GOOG 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 GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.