In this article, we will take a detailed look at the 5 Best Industrial Stocks to Buy Before Rate Cuts According to Jim Cramer: 5 Other Stocks He’s Talking About.
Jim Cramer said in a latest program on CNBC that the NASDAQ has become an “annoying source of funds” for other indexes as mutual funds pull out of tech and growth stocks that would not benefit from rate cuts and funnel these funds into the companies that can “super-charge” their earnings amid the expected rate cuts in September.
Cramer said that the decline of tech stocks could be “painful” for many because while these companies do not benefit from rate cuts, their earnings are still strong. Cramer said there are two kinds of companies that will benefit from rate cuts: the ones with cyclical businesses that thrive during rate cuts and those with high dividend yields.
Cramer said that by the time the Fed would announce its first rate cuts, it would have been “too late” to buy the stocks that benefit from rate cuts.
“You have to let them recharge, let them come down and then you can pull the trigger,” Cramer said.
In a separate program a few days ago Jim Cramer specifically talked about five industrial stocks he’s bullish on before rate cuts. In this article we mentioned these five stocks along with a few other stocks Cramer is talking about during his programs these days. With each company we have mentioned the number of hedge fund investors. 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).
10. Dover Corp (NYSE:DOV)
Number of Hedge Fund Investors: 28
Jim Cramer said in a program on CNBC that Dover Corp (NYSE:DOV) used to be a “classic metal bender” but it has transitioned to become a less cyclical company which is why he owns the stock for his charitable trust.
“I am proud of this one. I think it’s gonna have a big run. The new Dover now sells into some of the best secular growth themes of our era. Think lower emissions, refrigeration cooling systems, think heat exchangers and thermal connectors. Think data centers.”
Cramer said that the stock has been trading “sideways” since March despite reporting two stronger-than-expected quarters consecutively.
“I think the market is underestimating Dover Corp (NYSE:DOV), hence why we’re building our position for the charitable trust.” Cramer added.
Dover Corp’s (NYSE:DOV) business offers products and services via five segments: engineered products, clean energy & fueling, imaging & identification, pumps & process solutions and climate & sustainability technologies. Each segment’s revenue is over $1 billion on an annual basis. In 2023 the company’s full-year free cash flow came in at $1.1 billion, nearly double the previous year’s figure. This increase was due to effective working capital management and reduced capital expenditures. The free cash flow conversion rate has risen above 90%.
What makes Dover Corp (NYSE:DOV) a promising data center stock? The company talked about that during its latest earnings call:
We are also benefiting from our exposure to data centers and the secular growth in infrastructure investment with the significant power requirements of next generation chips that support artificial intelligence adoption are now requiring liquid cooling methods. We are exposed to liquid cooling of data centers in both our heat exchanger business, which enables heat transfer within the coolant distribution units and in the connector business which provides leak free liquid connection points at the server racks and manifolds and now directly to the individual chip cooling cold plates. I’ll leave the data center infrastructure market forecast to our end customers further down the chain. For us, it’s clearly an area of robust growth in the foreseeable future as evidenced by our recent order trajectory and high profile specification wins with the chip OEMs. Importantly, we have proactively installed production capacity and are well positioned to meet any meaningful inflections in demand with industry best lead times.
Dover Corp (NYSE:DOV) has an astonishing dividend growth history, with over 50 straight years of dividend hikes.
Wall Street expects the Dover Corp (NYSE:DOV) earnings to grow 9.20% next year, while the average analyst price estimate on the stock is $195, about 6% higher than the current stock price. The stock’s forward P/E ratio of 20 looks attractive based on these factors.
9. Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 32
When asked about Energy Transfer LP Unit (NYSE:ET), Cramer said that he’s been “very impressed” with ET and the company has done a “very good job.” Cramer said that he used to be critical of the company’s management but it has delivered.
Mizuho also added the stock to its top picks list and gave an Outperform rating. The firm set a $20 price target on the stock, saying Energy Transfer LP Unit (NYSE:ET) improved leverage outlook should allow more aggressive capital return beyond the current 3- 5% distribution growth rate.
Energy Transfer LP Unit (NYSE:ET) is being pitched as an AI stock in the energy industry as the rise of data centers will increase energy demand, helping ET. According to an estimate, gas demand for electricity to run data centers is expected to increase by a whopping 8 billion cubic feet a day by 2030.
Bank of America published a list of stocks poised to benefit from the electrification theme of future technology, driven by AI, data centers and push for electrification. BofA picked Energy Transfer LP Unit (NYSE:ET) for this theme under the oil and gas category.
Energy Transfer LP Unit (NYSE:ET) remains one of the most notable players in the industry. During the March quarter, all segments of ET grew, with net income and adjusted EBITDA increasing by 11% and 13% on a YoY basis, respectively. Energy Transfer LP Unit (NYSE:ET) saw record volumes in its crude pipeline segment.
Energy Transfer LP Unit (NYSE:ET) bulls also argue that just 10% of ET business is exposed to the volatile commodities sector. Energy Transfer LP Unit (NYSE:ET) has also raised its full-year 2024 adjusted EBITDA guidance. Energy Transfer LP Unit (NYSE:ET) expects the metric to total in the range of $15.0 billion and $15.3 billion, compared to the previous range of between $14.5 billion and $14.8 billion.
Energy Transfer LP Unit’s (NYSE:ET) earnings are expected to grow 13% next year and 15% over the next five years on a per-annum basis. The stock’s forward P/E of 9.42 is still lower than the industry median of 11.88, which makes the stock undervalued given Energy Transfer LP Unit’s (NYSE:ET) growth projections.
8. Arm Holdings PLC – ADR (NASDAQ:ARM)
Number of Hedge Fund Investors: 38
Jim Cramer continues to like ARM. Here is what he said during a latest program:
“I think that Intel is getting whacked by AMD I think there is nothing that could lay a glove on Nvidia and I’ll tell you, I’d much prefer Arm Holdings PLC – ADR (NASDAQ:ARM).”
7. Cummins Inc (NYSE:CMI)
Number of Hedge Fund Investors: 38
Jim Cramer said that while Cummins Inc (NYSE:CMI) is known for making truck engines, the stock is a buy because of its energy transition solutions. Cramer said he likes low-carbon solutions made by the company. He also said Cummins is working on zero-carbon solutions for electric and hydrogen engines.
“I think they’ve been smart about working on green engines without abandoning the traditional mainstays that run on gas or diesel. More importantly, Cummins Inc (NYSE:CMI) has a thriving power systems business where they make generators and commercial power systems, including, yes, data centers.”
Cramer said had Cummins Inc (NYSE:CMI) been a pure-play trucking engines company he’d have stayed away from the stock. He highlighted that in the first half of 2024, sales of the Class 8 (top 8 truck companies) were down more than 16% year over year.
“We spoke to CEO Jennifer Rumsey on August 1 on Mad Money, and she explained that data centers have become a key source of growth for Cummins.”
Cramer also praised Cummins Inc (NYSE:CMI) latest quarterly results and said he was not expecting the strong growth of the power generation business.
Parnassus Value Equity Fund stated the following regarding Cummins Inc. (NYSE:CMI) in its first quarter 2024 investor letter:
“Cummins Inc. (NYSE:CMI), a leader in diesel and alternative fuel engines and generators, guided to a shallower-than-expected downcycle in 2024. New rules from the Environmental Protection Agency are expected to drive higher demand for the company’s truck engines in the coming years.”
6. Autozone Inc (NYSE:AZO)
Number of Hedge Fund Investors: 45
A caller recently asked Jim Cramer about his thoughts on Autozone Inc (NYSE:AZO), saying the company buys back a lot of its stock. Here is what Cramer said:
“The problem is that’s kind of all they are doing right now, they don’t have the old mojo, I’d admit that they lack the serious mojo per share number that I always like to have. But I will say this, they have hung in here pretty darn well.”
Cramer said that he would still buy the stock of Autozone Inc (NYSE:AZO) at the current levels ($3155).
Autozone Inc (NYSE:AZO) is an American retailer of aftermarket automotive parts and accessories. Bears used to argue that the company would have a tough time amid the rise of EVs since the demand for traditional auto parts would decline. However, ever since the EV demand slowed down, that argument fell apart. The traditional gasoline-powered cars still dominate U.S. roads, accounting for over 98% of all registered vehicles as of May 2024. Even if EV sales were to match those of internal combustion engine (ICE) cars, it would take a considerable amount of time for EVs to make a noticeable impact on the overall vehicle landscape.
5. Hubbell Inc (NYSE:HUBB)
Number of Hedge Fund Investors: 45
Cramer said he bought Hubbell Inc (NYSE:HUBB) about a “month ago”. The company makes equipment for utilities and large commercial uses of electricity.
“It’s a play on the monetization of the electrical grid and the overall need for more power to support the new manufacturing especially for the, yes, data centers.”
Cramer said that “Hubbell is also a renewable energy play because it helps to get power from solar panels or wind farms to the grid. That’s very good. I like Hubbell too.”
Cramer thinks that Hubbell Inc (NYSE:HUBB) is a “secular growth story.”
